Various restrictions on the trivial commutation of pensions are imposed by both the pension taxation regime and contracting out legislation. Administrators should ensure that the payment of a trivial commutation lump sum is compliant with these restrictions as well as with the Firefighters' pension scheme regulations.
This note does not provide advice on whether or not to trivially commute a pension.
In the case of a small pension in payment to a former firefighter, the lump sum payable in lieu of future pensions should be determined as follows:
Lump sum payable = (PEN × Fpen) + (SPEN × Fspen)
where:
PEN is the annual pension in payment
SPEN is the annual survivor's pension payable upon member's death
Fpen is the factor for pension in payment - Table 1
Fspen is the factor for contingent survivor's pension - Table 1
The survivor's pension used in the calculation is the pension that would actually be payable to the member's spouse or partner if the former firefighter died on the day of the calculation. No survivor's pension elements should be included when a former firefighter has no spouse or qualifying partner.
In all cases the factors should be applied to the member's or survivor's pension actually in payment (or which would actually be payable upon the member's death) from the scheme. This should include all pension increases up to the date of commutation including, for example, any increase needed to ensure that GMP anti-franking requirements are satisfied.
In the case of a small pension in payment to the surviving spouse or partner of a former firefighter the lump sum payable in lieu of future pensions should be determined as follows:
Lump sum payable = WPEN x Fwpen
where
WPEN is the annual pension in payment
Fwpen is the factor for surviving spouse or partner's pension - Table 2
In all cases the factors should be applied to the member's or survivor's pension actually in payment (or which would actually be payable upon the member's death) from the scheme. This should include all pension increases up to the date of commutation including, for example, any increase needed to ensure that GMP anti-franking requirements are satisfied.
