The scheme regulations give any member who ceases pensionable employment and retires from the scheme after 31 March 2008 the option to commute part of their pension to a 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 = Additional lump sum (£Y) / 12

For any member retiring early on actuarially reduced benefits, the additional 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.

Subject to meeting certain conditions, members liable to an Annual Allowance charge can make an election requiring the Scheme to pay an amount of the charge on their behalf out of their pension benefits (referred to as 'Scheme Pays'). Some members may have previously elected for tax charges to be met by Scheme Pays. In this case a reduction to the pension benefits should be made. The reduction (debit) must be applied to the pension benefit before any commutation for additional lump sum is made. Please refer to the actuarial guidance on Scheme Pays for more details on the calculations required for this benefit reduction.

Commutation is subject to certain restrictions:

• HM Revenue & Customs (HMRC) limits - The total lump sum, including that payable automatically to members of the 1995 Section, must not exceed HMRC limits.
• Guaranteed Minimum Pension (GMP) restrictions - Members are only allowed to exchange that part of their pension in excess of any GMPs for a lump sum.

HMRC limits

This guidance does not describe the tests to be carried out to check the maximum amount of tax free 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.

GMP restriction

Early retirement and commutation may be restricted if the main scheme pension, subject to any reduction for early retirement, will be less than a member's GMP at GMP payment age. For guidance on the GMP test that should be applied to check whether a member is eligible for early retirement and/or commutation, refer to the Voluntary early and late retirements in normal health guidance.