Use the value of your standard benefits to calculate the amounts in your maximum lump sum package
When you decide to take payment of your pension benefits you will have the option to exchange some of your annual pension for a tax free lump sum.
There is a maximum amount that can be taken as a tax free lump sum which is set by HM Revenue and Customs, which is 25 per cent of the capital value of your pension benefits or if lower, 25 per cent of your remaining lifetime allowance.
For every £1 of pension you exchange you then receive £12 as a tax free lump sum.
At GMPF, we will provide this option when you take your pension benefits and its at this stage you let us know your preferred option.
There are instances where this calculator would not be applicable, this could be because you have pension credit benefits in the fund, you opted out of the LGPS regulation changes in 2008 or you are impacted by the lifetime allowance.
If you have additional voluntary contributions (AVC) the calculator will not take these into account. You can take some or all of these as tax free cash, and we will let you know how much as you approach retirement.
If you know the value of your standard pension benefits, you can use this modeller to give you an idea of your maximum lump sum, under HMRC rules. You can find the value of your standard pension benefits in your annual benefit statement or by logging into your My Pension account.
Please be aware that if you choose to retire early (before your normal pension age) reductions may apply to all, or part of your pension.
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The above figures are for illustrative purposes only. They do not include any reductions for early payment of benefits, or any additional pension contributions you may be making. DO NOT make any decisions in respect of your benefits based on these figures. If you wish to receive payment of your benefits on hold from your normal retirement date, we will automatically contact you before your normal retirement date with your payment options.
Trivial commutation
The LGPS is a statutory defined benefit pension scheme, and the regulations specify the benefits you will receive. Your LGPS pension is guaranteed, and we will pay it to you from your retirement date for the rest of your life. You can choose to convert some of your annual pension to a one-off tax free lump sum at retirement, but not all. However, there is an exception, as some members have the right to something called a trivial commutation, but this only applies in a few cases.
If your pension is relatively small, it may be possible to receive all your LGPS benefits as one lump sum under trivial commutation rules. These rules are separated into three scenarios, all of which affect very few GMPF members: There is a list of criteria relevant to each scenario:
Scenario one – Trivial commutation from all pension schemes
- You must be 55 or over in most cases, except if you’re retiring due to ill health.
- The total value of all the pensions you have must be less than £30,000 (this is not the amount of your annual pension but the overall capital value which is calculated using HMRC calculations).
- You must take all your benefits in the LGPS in England and Wales as a trivial lump sum.
- You only have a single 12 month period in which to commute your pensions, this usually starts from the date your first commutation payment is made.
If the current value of your GMPF pension is more than around £1,500 a year, then the total value of your pension will already be £30,000 or more, so trivial commutation will not be an option open to you.
Scenario two – Small lump sum from the LGPS only
- You must be 55 or over in most cases, except if you’re retiring due to ill health.
- The total value of all your LGPS benefits is less than £10,000 (this is not the amount of your annual pension but the overall capital value which is calculated using HMRC calculations).
- You were an active member of the LGPS on or after 1 April 2008.
Scenario three – Dependants pension commutation
Similar to scenario one, but this only applies to any dependants pensions you have been awarded following the death of a partner or parent. Except if one of the following applies:
- Only dependants benefits you receive from the LGPS are included in the valuation.
- The commutation payment must be less than £30,000
- There are no age limits.
- There is no time limit, but all dependant benefits within the LGPS must be commuted at the same time.
If we pay you a trivial commutation lump sum, you cannot change your mind afterwards. You will not receive any future pension payments from us, and when you die, your dependants and family will not receive any benefits from us either. Therefore, we strongly recommend you obtain independent financial advice before making any decisions if trivial commutation is an option open to you.