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  • Exchanging part of your pension for lump sum

Exchanging part of your pension for lump sum

Your LGPS benefits are made up of:

  • A pension that, after leaving, increases every year in line 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 draw 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  how your pension is calculated section 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.

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.

To get an idea of how much lump sum you may be able to take on retirement, check your deferred benefit statement using the Pensions Portal and use these details in the Lump Sum Calculator. If you are retiring earlier than your normal pension age, your benefits will be reduced. Please click here to access the early retirement reductions so that you can apply these to your deferred benefits before using the calculator.

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