Take your pension as a lump sum
Even if you are already receiving your pension, you may be able to receive payment of all your pension rights as a one-off lump sum. This is called trivial commutation.
The rules and criteria about trivial commutations are different if your pension is not yet in payment. See taking your deferred benefits for more information.
Things to consider
Before deciding whether to take a lump sum payment from your pension, you should consider whether this is your best financial option.
Taking your pension as a one-off lump sum means that:
- you will no longer receive monthly pension payments
- we will have no further liability for you in the LGPS
- if you were to pass away before your spouse, civil partner or cohabiting partner, they would not receive a survivor's pension
We are unable to provide advice but you can get advice from an independent financial adviser or get free advice from MoneyHelper. You should also be wary of anyone that urges you to take a trivial commutation and invest it somewhere else as this is often a scam. Visit the FCA website to find out how to spot scams.
Eligibility
Trivial commutation may be available to pensioners, pension credit members and those receiving a survivor/dependant’s pension. However, to be able to receive your pension as a lump sum, you must meet certain criteria set by the government.
See the circumstances below to check if you are eligible.
If you are a pensioner member or a pension credit member, you may be able to trivially commute if the total value of all your pensions across all registered pension schemes is less than £30,000 (this includes your LGPS pension(s) held at Buckinghamshire, any other LGPS pensions held at other funds, and any other private, personal, or occupational pensions)
So that we can confirm if you're eligible, you will need to provide us with an official letter showing the value of any other pensions you hold outside of LGPS. Otherwise, you will need to confirm that you do not hold any other pensions.
If you have previously taken a trivial commutation payment from another registered pension scheme, you can only trivially commute your LGPS pension within one year of the date of that payment. You will require a letter confirming the date payment was made and the total value.
If you are receiving a survivor’s or dependant’s pension from us, you may be able to take it as a one‑off lump sum if it qualifies as a trivial commutation lump sum death benefit. This is when the pension is small enough to be fully extinguished by a single lump‑sum payment. This option only applies to the survivor’s pension you receive from us and any payment made is at our discretion using factors from the Government Actuary’s Department.
As of 6 April 2024, the payment must be checked against your available Lump Sum and Death Benefit Allowance (LSDBA), which limits the amount of lump sums that can be paid tax‑free on death benefits. If the lump sum falls within your remaining LSDBA, it is normally tax‑free; if it exceeds this allowance, the excess is taxed as income.
How we work out the value of your pension pot
To check whether you meet the criteria to trivially commute we will need to calculate the pension pot value of your LGPS pension.
If your pension was put into payment before 6 April 2006
If your pension was put into payment before 6 April 2006, we do this by multiplying your annual pension (before tax) at 5 April 2006 by 25. Any tax-free cash you received before this date is not included in the calculation.
e.g. £1,250 (annual pension) x 25 = £31,250.
In this example, trivial commutation is not possible as the pension pot exceeds £30,000.
If your pension was put into payment on or after 6 April 2006
If your pension was put into payment on or after 6 April 2006, we do this by multiplying your annual pension (before tax) by 20.
e.g. £750 (annual pension) x 20 = £15,000
In this example, trivial commutation is possible as the pension pot value is less than £30,000.
How much you will receive
The pension pot value is not the amount you will receive.
Calculating the actual trivial commutation payment is complicated. We work out the payment using factors issued by the Government Actuary Department (GAD) which are based on your age and the value of your pension.
Income tax will also be deducted from the amount you receive. Generally, a certain amount will be taxed at 20%, and anything exceeding that amount will be taxed at 40%.
How to apply
If you think you may be eligible to take a one-off lump sum from your pension, contact us. We will provide you with an estimate of how much the payment will be.
If you do not wish to proceed once we have given you the figure, you don't have to. We will continue paying you your pension as usual.
Unauthorised trivial commutations
It is important that you tell us about any other pension rights that you hold outside of the LGPS.
If you take a trivial commutation incorrectly, perhaps because you had other pension pots that took the total value of your pension rights over £30,000, you could be liable to pay a penalty tax fine to HMRC.
De minimis payments
It may be possible for you to take your LGPS benefits as a lump sum under the ‘de minimis’ rules, even you don’t meet the trivial commutation rules described above.
To qualify, all of the following must apply:
- you must be aged 55 or over (or of GMP age if applicable)
- the payment must not exceed £10,000
- you must not be a controlling director of the sponsoring employer
- taking the payment must extinguish all your rights to benefits under the Scheme
- you must not have transferred out of the Scheme in the three years before the date of payment
This option isn’t available if you’re receiving deferred pension benefits because you left the LGPS before 1 April 2008. Likewise, it is also not available where a pension credit relates to a member who left the Scheme before 1 April 2008 as the same regulatory restriction applies.
De minimis payments are not available to those receiving a survivor or dependant pension as these rules only apply to a member’s own LGPS benefits and require extinguishing the member’s rights, something that does not apply to survivors.
Contact us about your pension
If you have any questions, you can contact us about your pension.