What are small pots pension lump sums?
Answered 17 March 2026
What the law says
Small pots lump sums are one-off lump sum payments from registered pension schemes authorised under Regulations 6 to 12 of the Registered Pension Schemes (Authorised Payments) Regulations 2009 (SI 2009/1171). The most commonly used provisions are Regulations 11, 11A and 12.
Key legal features:
- Maximum amount: Each payment must be no more than £10,000.
- Extinguishment of rights: In most cases, the payment must extinguish all the member's remaining rights under the arrangement.
- Taxation: Under Regulation 3, these lump sums are taxed under section 637G ITEPA 2003 as if they were a trivial commutation lump sum. Under s.637G ITEPA 2003, where a member has uncrystallised rights, 75% of the lump sum is treated as taxable pension income (i.e. 25% is tax-free); where all rights are crystallised, the full amount is taxable.
HMRC guidance / practice
What they are: Small pots lump sums (also called "small lump sums") allow benefit rights to be commuted and paid as a one-off lump sum outside the more demanding conditions that apply to a formal trivial commutation lump sum.
Which schemes can pay them:
- Regulation 11 – occupational pension schemes
- Regulation 11A – non-occupational (personal) pension schemes
- Regulation 12 – public service pension schemes
- Payments under Regulation 11A can be made regardless of the individual's total pension savings across all registered pension schemes, and in addition to any trivial commutation lump sum.
Tax treatment in practice:
- Where the payment represents uncrystallised rights: 25% is tax-free and the balance is chargeable to income tax as pension income.
- Where the payment represents crystallised rights: the full amount is chargeable to income tax as pension income.
- Where the payment is a mixture of both, only 25% of the uncrystallised portion is tax-free.
- PAYE must be operated by the payer on the taxable portion.
- Tax is deducted at the basic rate before payment.
- Small pots lump sums are listed as a category of pension income from registered pension schemes.
Money purchase annual allowance: Payment of a small pots lump sum is not a trigger event for the money purchase annual allowance (unlike an uncrystallised funds pension lump sum).
Practical example: Karen has a money purchase arrangement worth £8,000 in a non-occupational pension scheme. As the fund does not exceed £10,000, she can take the whole amount as a small lump sum (provided she has not already received three such lump sums from non-occupational schemes). She receives 25% (£2,000) tax-free and the remaining £6,000 is chargeable to income tax as pension income.
Citation sources
Karen has a money purchase arrangement with a fund value of £8,000 in a non-occupational pension scheme and wants to access all the funds in the arrangement as a lump sum. As the fund value does not exceed £10,000 Karen can take the whole amount as a ‘small lump sum’ as she meets the necessary conditions for such a lump sum to be paid, providing she has not previously received three such lump sums from non-occupational pension schemes. The lump sum is paid 25% tax free with the remainder of £6,0
funds may be consolidated either by merging arrangements into a smaller number of arrangements or by a transfer of funds between multiple arrangements to allow the maximum small pot to be taken from either one or each of two/three arrangements under the scheme. A ‘reshaping’ of existing arrangements in this way either by way of merging multiple arrangements or internal 'transfers' of funds between multiple arrangements in the same scheme will not involve the setting up of a new arrangement with
Part 9 Pension income CHAPTER 15A Lump sums under registered pension schemes Tax treatment of authorised lump sums Trivial commutation lump sums and winding-up lump sums 637G 1 Subject to subsection (2), a member of a registered pension scheme to whom— a a trivial commutation lump sum, or b a winding-up lump sum, 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
As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives. If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives. Glossary PTM000001 Sections 579A to 579D and Chapter 15A Income Tax (Earnings and Pensions) Act 2003 Pension income from a
From April 2015 only Defined Benefits (DB) pension schemes will be able to make trivial commutation payments. The current ‘basic rate’ regime will remain unchanged so that pension providers will continue to deduct tax at the basic rate from these lump sums before paying them. The tax treatment of small pots lump sums will be continue unchanged. They will continue to be payable from both money purchase and DB pension funds and pension providers will continue to deduct tax at the basic rate from t
Regulations authorise certain small lump sums to be paid from a registered pension scheme without having to follow the more demanding conditions for what is formally termed a trivial commutation lump sum. Such one-off small lump sum payments are allowed as authorised member payments in relation to individual registered pension schemes, or related occupational pension schemes. The circumstances under which such one-off payments can qualify as authorised member payments are set out earlier on this
In certain circumstances the member’s rights under a pension scheme may be commuted and paid as a one-off authorised lump sum. This will be a trivial commutation lump sum if all the conditions outlined in the next section of guidance are met. Alternatively, if the payment is not more than £10,000 the lump sum may be authorised under regulations 11 to 12 of the Registered Pension Schemes (Authorised Payments) Regulations 2009 - SI 2009/1171. PTM063700 provides guidance about these types of small
The Registered Pension Schemes (Authorised Payments) Regulations 2009 (SI 2009/1171) Regulations 6 to 12 allow lump sum payments of no more than £10,000 to be paid to the member in various circumstances. In most cases the payment must extinguish all the member’s remaining rights under the pension scheme. The most common payments are made under regulations 11, 11A or 12. These are often called ‘small pots lump sums’ or ‘small lump sums’. PTM063700 provides guidance on the payment conditions for t