Pensions – Trivial Commutation

Types of Trivial Commutation

There are 2 types of trivial commutation:

1. The original trivial commutation where the member commutes all his pension benefits across all schemes within a 12 month period

2. The provision for a scheme to pay a very small pot (originally less than £2,000), independent of the member’s other pension benefits

Make sure you know the rules in RPSM for paying each type of payment and which type of payment is being made (this affects the PAYE return).

Payroll – PAYE

If you use Omni’s PAYE module then the trivial pension needs to be paid as a Manual Payment (not through the bulk monthly run). This will calculate the tax due on the part of the payment that is taxable in the normal way and store the PAYE details..

Bank Transactions

The bank transactions then have to entered manually (the same as all Manual Payments). The lump sum and the net pension need to be recorded as separate bank transactions. The bank transactions category should be the normal Lump Sum and Pension (nothing special for Trivial benefits).

Benefits

On the Members, Pension screen, in the grid on the Benefits Payments tab, the description should be set to

· ‘Trivial LS’ for the lump sum part

· ‘Trivial Pen A’ for the pension if it is the member based commutation of all benefits

· ‘Trivial Pen B/C’ for the pension if it is just the commutation of this scheme’s benefits

The explanation of Trivial Pen B/C etc can be found in the HMRC’s RTI reporting specification.

PAYE – RTI

It is best for the FPS report for RTI to be submitted for each person’s trivial commutation independently. This will find that the pension payment on the date specified is a trivial pension and implement the rules specific to trivial pensions. It has to report the member as a new person on the PAYE scheme (if not already receiving a pension) and then that they leave immediately the payment is made. The FPS has to report the lump sum on which no tax was paid and so it is important that the lump sum bank transaction has been posted and imported and the description set to ‘Trivial LS’ before the FPS is run.