“I have a small pension through an annuity, which I am advised is worth £28,500. Under the government scheme, I would like to take this as a trivial commutation lump sum [ie, cash in the lump sum].However, I have another small annuity which is £113 a year, which takes me over the £30,000 threshold.I am told I cannot cancel the annuity. Is there any way that I can cancel it in order to access the lump sum?”
Unfortunately, the decision to purchase an annuity is, in the vast majority of cases, irreversible so you would be unable to cancel it. At one point the government did announce that it was looking at plans that would allow people to cash in their annuities – the so-called secondary annuity market – but these were dropped in 2016.
In terms of your other small pot, you do not mention if it is a defined contribution (DC) or defined benefit (DB) pension but you do have options. If the pension is a DC one, then under the pension freedoms that came in in 2015, you would be able to take it as a cash lump sum less any tax due if you are over the age of 55.
If you have a DB plan, then you would need to do a DB to DC transfer if you wanted to be able to take your money as outlined above. Under current rules, you would not have to pay for regulated financial advice to make this switch as your pension is worth less than £30,000.
However, you may find that many providers will refuse to do a non-advised transfer so you may have to shop around.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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