Taking a lump Sum
Your LGPS benefits are made up of:
- A pension that is adjusted to keep up with the cost of living for the rest of your life, and
- The option to exchange part of your pension for a tax-free lump sum that is paid when you take your pension benefits
In addition, if you were a member of the LGPS before 1 April 2008 you will also have built up an automatic lump sum - see the section how is your pension calculated for more information.
When you draw your pension benefits you will have the option to exchange part of your pension for lump sum, within certain limits set by HM Revenue and Customs. For every £1 of pension you exchange you will be provided with £12 of tax free lump sum.
You must inform your pension fund administrator that you wish to take up this option in writing before your benefits are paid. You may wish to seek financial advice before making your decision and it is therefore important that you contact your pension fund administrator well in advance of your intended retirement date so they can provide you with more details.
If you elect to exchange pension for lump sum your pension will be reduced accordingly. Any subsequent pension for your spouse, civil partner, eligible cohabiting partner or eligible children will not be affected.
If you have a Guaranteed Minimum Pension (GMP), you may not reduce your pension to below the level of your GMP.