The scheme regulations give any member who ceases pensionable employment and retires from the scheme the option to commute part of their pension to lump sum. This right also applies to pension credit members, except those with a disqualifying pension credit.

This section refers to the lump sum available by commutation at retirement for whatever reason except serious ill health, regardless of the member's age or sex, but subject to the restrictions as set out below.

A factor of 12 is prescribed in the scheme regulations and should be used to calculate the amount of lump sum by commutation of a member's pension (and the corresponding reduction in pension).

The relevant calculations are:

For a specified reduction of £X pa of pension, the amount of lump sum available is:

Lump sum = Pension (£X pa) x 12

To receive a specified lump sum of £Y, the reduction in pension required is:

Reduction to annual pension = Lump sum (£Y) / 12

For any member retiring early on actuarially-reduced benefits, the lump sum is available by commutation of the actuarially-reduced pension. The same £12 lump sum: £1 pa pension factor as above is applied to the actuarially-reduced pension.

Any member who has previously elected for Scheme Pays will have a negative defined contribution (DC) balance at retirement. This balance must be converted into a benefit reduction at retirement and the resultant pension debit applied to the pension benefit before any commutation for lump sum is made. Please refer to the guidance on Scheme Pays for more details on the calculation of this benefit reduction.

Commutation is subject to certain restrictions. The total lump sum must not exceed HM Revenue and Customs (HMRC) limits.

This guidance does not describe the tests to be carried out to check the maximum amount of lump sum available. The scheme administrator should ensure that the proposed lump sum is within the applicable limits. Typically, a member is permitted to take a lump sum of up to 25% of the capital value of the benefits to be paid. However, this can be restricted further in certain circumstances.

No tests are required at retirement if the member has a Guaranteed Minimum Pension (GMP) as a result of a transfer of previously contracted out benefits.