Section 637G | Trivial commutation lump sums and winding-up lump sums ^F1

(1)Subject to subsection (2), a member of a registered pension scheme to whom—^F1

(a)a trivial commutation lump sum, or^F1

(b)a winding-up lump sum,^F1

is paid under the scheme is treated as having taxable pension income for the tax year in which the payment is made equal to the amount of the lump sum.

(2)If, immediately before the lump sum is paid, the member has uncrystallised rights under any one or more arrangements under the pension scheme, the amount of the taxable pension income —^F1F2

(a)if all the member’s rights under the pension scheme are uncrystallised rights, is 75% of the lump sum, and^F1F2

(b)otherwise, is reduced by the tax-free element (if any).^F1F2

(3)In subsection (2) “the tax-free element” means 25% of the value of any uncrystallised rights extinguished by the lump sum.^F1

(4)In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.^F1