With effect from February 2016, the Trustees updated the Scheme’s commutation factors, which are used when a member wishes to exchange part of their pension for a tax free cash sum at retirement. Previously the Scheme used a single factor of 9 to 1 so that members could exchange pension for cash at a rate of £1 of pension for a cash sum of £9. The 9 to 1 factor applied on retirement at any age and had been in place since the Scheme’s establishment.
Having taken advice from the Scheme Actuary, the Trustees have put in place new factors which apply to current and future retirements. The new factors are age-related so that the cash sum provided takes into account the period over which the pension would have been paid. For members retiring at age 60, each £1 of pension given up will provide a cash sum of £15. For members retiring at 65, each £1 of pension given up will provide a cash sum of £13.50. Please note that the amount of tax free cash taken at retirement is subject to HMRC limits. Your retirement quotation will show the maximum amount of cash that you can take.
Members should consider taking independent financial advice when deciding whether to exchange part of their pension for a tax free cash sum. Members should also note that the Trustees will review the factors again from time and may update the factors again in future.