Payment options for your pension

When you take your LGPS pension, you will have some important decisions to make about how you would like it to be paid.

This page includes general information about retirement options. You will be sent your individual options and figures when you leave your employment.

The standard LGPS benefit package generally consists of an ‘annual pension’ and sometimes a ‘lump sum’.

Annual pension is the amount that you would receive each year once your pension is in payment. It will be divided by 12 and paid to you on the last working day of the month.

An annual pension is payable for life, and it is subject to income tax.

A lump sum is a tax-free one-off payment made to you as soon as possible after your retirement date.

If you paid into your pension after 1 April 2008, you would not have a lump sum included in your ‘basic benefit package’. However, when you retire, you will be able to choose to take up to 25% of your pension pot as a lump sum payment, as long as this amount is not more than available Lump Sum Allowance, it will be tax-free. You can do this by exchanging some of your annual pension to create a lump sum.

For every £1 of ‘annual pension’ you give up, you will receive £12 as a lump sum payment. If you choose to take the maximum 25% this is known as the ‘maximum commutation package’.

You can also choose to take any amount of lump sum up to the maximum.

Choosing to exchange some of your annual pension to create lump sum will not reduce any survivor's pension paid in the event of your death.

If you were in the scheme before 1 April 2008, you will have an ‘automatic lump sum’ included in your ‘basic benefit package’. However, you can still choose to covert some of your annual pension to increase this lump sum up to 25% of your total pension pot. You won’t be able to convert the automatic lump sum into ‘annual pension’.

You can use My Pension Online to get an estimate of how much lump sum you could commute. If you are close to retirement, you can request an estimate from us.

If you have given your notice to retire, the basic benefit package and the maximum commutation package figures will be provided to you with your retirement pack.

When you take your pension, we will send you a retirement pack which will include a set of forms for you to select your lump sum options.

If you have a small pension pot, you may also have the option of taking all your LGPS pension benefits as a one-off lump. This is known as a trivial commutation. If we think this option may be available for you, we will let you know in your retirement pack.

For more information on the eligibility criteria, see taking all your pension as a one-off lump sum.

If you have paid towards Additional Voluntary Contributions (AVCs), you will also need to decide what you would like to do with them.

For information, see your AVC options at retirement.

Deciding when you would like your LGPS pension paid is a very important decision. We recommend getting guidance or independent financial advice where possible.

For more information, see get help with decisions about your pension