This section refers to benefits payable to members in serious ill-health who exercise the option to exchange their entire pension for a lump sum.

For members retiring in serious ill-health, the £12 lump sum: £1 pa pension factor should be applied, subject to the modification set out below.

The lump sum payment from commuting the entire pension should be determined as follows:

1. Calculate the maximum amount of lump sum the member would be entitled to commute tax-free, which is the limit set by HMRC (see restriction subheading in Exchange part of retirement pension for lump sum).
2. Commute this at the rate of £12 lump sum: £1 pension pa to give the residual pension as follows:
   Residual pension = Pension to be put into payment ignoring commutation - maximum lump sum / 12
3. The residual pension should then be converted to lump sum using a factor of £5 lump sum: £1 pension pa as follows:
   Lump sum from residual pension = Residual pension x 5
4. Total lump sum payable = Tax-free lump sum allowed by commutation + lump sum from residual pension

Any member who has previously elected for Scheme Pays will have a reduction applied to their benefits at retirement. The reduction must be applied to the pension benefit before exchange of the whole pension for a lump sum due to serious ill health is made.