Information on exchanging part of an annual pension for a lump sum.
At retirement, members may be able to exchange some annual pension for a lump sum / larger lump sum.
This applies to:
- 1995 section (except members who left before 1 April 2008)
- 2008 section (except members who left before 1 April 2008)
- 2015 scheme
HMRC put some limits on the amount of tax free lump sum a member can take. The limit is the lower of either:
- 25% of the capital value of your benefits after commutation
- 25% of the remaining standard lifetime allowance
You can find an example in the member guides, as well as information about lifetime allowance, on the NHS Pensions website.
Getting a maximum lump sum
In either section you can increase the amount of lump sum you take and have a smaller pension.
We pay for this by reducing your pension by £1 for every £12 of extra lump sum you choose to take.
HMRC limit the amount of pension you can convert without a charge.
Your statement shows the estimated amount of pension you might expect if you go for maximum lump sum.
It does not take into account HMRC limits or your lifetime allowance position. It is important to note this if you have already taken other benefits from other pension provider(s).
You may have transitional protection from HMRC. You will need to check your lump sum and lifetime allowance at retirement.
Lump sum rules
NHS Pension Scheme legislation does not allow you to commute pension to:
- additional lump sum causing you to have below your guaranteed minimum pension - if you had membership before 6 April 1997
- a lump sum HMRC identify as an unauthorised payment
Giving up pension
Giving up pension for lump sum does not affect the amount of survivor pension paid to a:
- surviving spouse
- civil partner
- qualifying partner you have nominated to recieve:
- an adult dependant pension (officer pension statement)
- a survivor pension (practitioner pension statement)