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The amount of pension surrendered or "commuted" is
£2,500 p.a
.
The lump sum the member receives is:
18 x £2,500
or
£45,000.00
The remaining pension is
£10,000 - £2,500
or
£7,500 p.a.
Important Notes:
The Commutation Factor that will be applied will be determined by the Trustees after taking
the advice of the Scheme Actuary.
The factor of 18 used in this example is purely for the
sake of illustration
.
The factors used depend on the member's age and vary from time to time. If you are thinking
of taking a cash lump sum instead of part of your pension, you should ask what factor will be
applied in your case.
There are limits imposed by HM Revenue & Customs on the amount of cash you can take
which must be adhered to by the Scheme. You will be advised of the amounts involved
before you retire so that you can decide what to do, but the basic rule is that you can take up
to 25% of the total value of your benefits as tax-free cash (you should note that this is not
quite the same as 25% of your pension).
Taking all of your pension as a cash lump sum
Special provisions apply in circumstances of serious Ill-health, or if your pension is small,
which might allow you to exchange more than 25% of the value of your benefits for a PCLS.
In some of these cases all of your pension can be converted into a lump sum, but part of the
lump sum is usually subject to tax.
If you think this might apply to you then you should contact the Scheme Administrator for
more details.