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Adjust the way your benefits are paid out
You may be able to alter the balance of your retirement package by:
- converting part of your pension into lump sum
- getting a small pension paid as a lump sum (commutation)
Converting part of your pension into lump sum
When you draw your deferred benefits you will be able to take a bigger lump sum by giving up some of your pension. You can take up to 25% of the capital value of your LGPS benefits as a lump sum (or, if lower, 25% of the lifetime allowance less an adjustment for other pension benefits).
Any lump sum automatically paid on retirement as explained in Calculate your deferred benefits roughly equates to 15% of the capital value. Any amount you take as a lump sum above the automatic lump sum would be achieved by exchanging part of your annual pension for a one-off tax-free cash payment – for each £1 annual pension given up you will receive £12 lump sum. You may not reduce your pension to below your Guaranteed Minimum Pension.
Your lump sum will be increased and your pension reduced in accordance with any election you make. Any subsequent long term pension for your husband, wife, civil partner or children will not be affected if you decide to exchange part of your pension for a lump sum nor will the long term pension payable to a co-habiting partner nominated by you if you were an employee who contributed to the LGPS in England and Wales after 31 March 2008 and who left the Scheme after that date or to a co-habiting partner nominated by you if you contributed into the LGPS in Scotland after 31 March 2009 and left after then.
Getting a small pension paid as a lump sum
The LGPS allows your pension fund administrator to pay a small pension as a single lump sum payment. The circumstances where this may happen are restrictive, particularly if you have other pension benefits.
Once your pension has been paid as a lump sum, all other benefits from the LGPS would have to cease, so your pension fund administrator will have to check that you have no other LGPS benefits before they can decide whether your pension can be paid as a lump sum.
Your pension fund administrator will provide you with the information you need to make an informed decision near the time your pension becomes payable.