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Retirement lump sums
From both sections of the Scheme you are able to take some of your benefits as a retirement lump sum. This part of the site describes your entitlement and options and provides some examples to show how these are calculated.
A calculator tool is available on this website to help members model the amount of additional lump sum they can claim.
Claiming a bigger lump sum does not affect the level of survivor benefits payable to a partner or dependent child.
The maximum lump sum you can take is 25% of your capital value. This is determined by a limit set by Her Majesty’s Revenue and Customs (HMRC) and adopted by the Scheme Regulations. It applies across your entire pension arrangements so your NHS retirement lump sum may be limited to a smaller amount if you have other pension savings.
| 1995 Section |
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The part of the site that describes your benefits on retirement explained that you will receive a retirement lump sum which is normally three times your annual pension. You also have the option of receiving a larger retirement lump sum and a smaller annual pension.
You have to give up some of your pension to get more retirement lump sum. You will receive £12 of lump sum for every £1 of pension you give up.
Your capital value is determined by the HMRC rules and is calculated by multiplying your reduced pension by 20 and adding your total retirement lump sum. In the majority of cases the maximum lump sum you can take works out as approximately 5.36 times your 1995 section pension. |
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Example 5
The midwife in example 1 in the age retirement section decides to take a larger retirement lump sum when she retires. She receives £12 of lump sum for each £1 of annual pension given up so she chooses to exchange £500 of her annual pension to get an extra £6,000 lump sum, (£500 x £12 = £6,000)
Her benefits are now:
Pension £9,129.48 - £500 = £8,629.48 per year
Retirement lump sum £27,388.44 + £6,000 = £33,388.44
The maximum lump sum she could take is £21,516 higher than her normal lump sum. She would have to give up £1,793 of her annual pension to get this so her benefits would be:
Pension £9,129.48 - £1,793.00 = £7,336.48 per year
Retirement lump sum £27,388.44 + £21,516.00 = £48,904.44 |
| 2008 Section |
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There is no basic lump sum entitlement in the 2008 section but you do have the option of receiving a retirement lump sum by giving up a part of your pension.
The capital value of your benefits is determined by HMRC rules and is calculated by multiplying the pension you will receive by 20 and adding any retirement lump sum. The maximum lump sum you can take works out as approximately 4.28 times your 2008 section pension.
You have to give up some of your pension to get a retirement lump sum. You will receive £12 of retirement lump sum for every £1 of pension you give up. |
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Example 6
The midwife in example 3, in the age retirement section, decides to take a retirement lump sum when she retires. She receives £12 of lump sum for each £1 of annual pension given up so she exchanges £1,500 of her annual pension to get a retirement lump sum of £18,000. (£1,500 x £12 = £18,000)
Her benefits are now:
Pension £12,172.62 - £1,500 = £10,672.62 per year
Retirement lump sum = £18,000
The maximum lump sum she could take is £52,164.00
She would have to give up £4,347.00 of her annual pension to get this so her benefits would be:
Pension £12,172.62 - £4,347.00 = £7,825.62 per year
Retirement lump sum = £52,164.00 |
Further information can be found on the Pension Commutation FAQs factsheet.