PART 8Payment of benefits
CHAPTER 3Payment of lump sums
Member declaration161
1
The scheme manager may not pay a member a lump sum under this Chapter unless the member declares in writing that, on payment of the lump sum, paragraph 3A of Schedule 29 to FA 200424 would not apply.
2
The declaration must be—
a
signed by the member;
b
in a form specified by the scheme manager; and
c
provided by a date determined by the scheme manager.
Commutation of part of pension162
1
The following members may apply to the scheme manager to receive a lump sum in place of part of a pension—
a
a member who is entitled to payment of a retirement pension;
b
a pension credit member who is entitled to payment of a pension credit retirement pension.
2
Paragraph (1)(b) only applies if—
a
the member’s pension credit is derived from rights attributable to the pensionable service of a pension debit member; and
b
a retirement pension does not become payable to the pension debit member before the transfer day in respect of that pensionable service.
3
An application under this regulation must—
a
be in writing;
b
be made when the member applies under regulation 159 for payment of the pension; and
c
specify the amount of the lump sum which the member wishes to receive.
Amount of lump sum payable under regulation 162163
The amount of a lump sum payable under regulation 162 must—
a
be a multiple of £12; and
b
not exceed P’s permitted maximum.
Commutation amount for lump sum payable under regulation 162164
1
For the purpose of calculating the annual rate of pension payable to a member (P) who receives a lump sum under regulation 162, the commutation amount is 1/12th of the amount of the lump sum.
2
If a retirement pension commuted under regulation 165 ceases to be payable under regulation 94 or 111, the commutation amount for any retirement pension that subsequently becomes payable to P is an amount determined by the scheme manager after consulting the scheme actuary.
Commutation of whole pension (serious ill-health)165
1
This regulation applies to a member (P) who, on the entitlement day for a pension, has a life expectancy of less than a year.
2
P may apply to the scheme manager to receive a lump sum instead of the pension.
3
The application must—
a
be in writing;
b
be made when P applies under regulation 159 for payment of the pension; and
c
be accompanied by all the medical evidence necessary for the scheme manager to determine that P is entitled to payment of the lump sum.
4
If P is eligible to apply under regulation 162 to receive a lump sum under that regulation—
a
the largest permissible lump sum is to be paid under that regulation; and
b
the commutation amount under that regulation is to be deducted when calculating the annual rate under regulation 166.
5
In this regulation, “pension” means—
a
an age retirement pension and any phased retirement pension payable with it;
b
an ill-health pension and a total incapacity pension or phased retirement pension payable with it; or
c
a pension credit retirement pension.
Amount of lump sum payable under regulation 165 instead of retirement pension166
1
This regulation applies to a member (P) who applies under regulation 165 to receive a lump sum instead of a retirement pension.
2
The amount of the lump sum payable to P is the total of—
a
for an age retirement pension, ill health pension or total incapacity pension, a sum equal to 5 x the annual rate of the retirement pension; and
b
for a phased retirement pension that is already in payment, a sum equal to—
(A-B) x the annual rate of the phased retirement pension
where—
A is 5, and
B is the period (in years and fractions of a year) from the date on which the phased retirement pension was first paid until the date of the application25.
Amount of lump sum payable under regulation 165 instead of a pension credit retirement pension167
1
This regulation applies to a member (P) who applies under regulation 165 to receive a lump sum instead of a pension credit retirement pension.
2
The amount of the lump sum payable to P is an amount equal to 5 times the annual rate of the pension credit retirement pension.
Commutation: small pensions168
1
If paragraph (2) applies, the scheme manager may, on the application of a member (P), commute a retirement pension by paying a lump sum to P.
2
This paragraph applies if—
a
the lump sum is a trivial commutation lump sum as defined in paragraphs 7 and 7A of Schedule 29 to FA 2004 or falls within regulation 11 or 12 of the Registered Pension Schemes (Authorised Payments) Regulations 200926;
b
the application under paragraph (1) is made when P applies under regulation 159 for payment of the retirement pension;
c
in the 3 years ending with the date of the application, a transfer value payment has not been made in respect of P;
d
a transfer value payment or cash transfer sum has not been accepted under Part 10 in respect of P’s rights accrued under a personal pension scheme; and
e
in the 5 years ending with the date of the application, a transfer value payment or cash transfer sum has not been accepted under Part 10 in respect of rights accrued under another occupational pension scheme.
3
If a lump sum is paid under paragraph (1), benefits are not payable under Part 6 on P’s death.
4
The scheme manager may, on the application of a pension credit member (P), commute a pension credit retirement pension by paying a lump sum to P if—
a
the lump sum is a trivial commutation lump sum as defined in paragraph 7 of Schedule 29 to FA 2004 or falls within regulation 11 or 12 of the Registered Pension Schemes (Authorised Payments) Regulations 2009;
b
the application is made when P applies under regulation 159 for payment of the pension; and
c
in the 3 years ending with the date of the application, a transfer value payment has not been made in respect of P.
5
The scheme manager may, on the application of a beneficiary to whom a pension is payable under Part 6, commute that pension by paying a lump sum to the beneficiary if—
a
the application is made when the beneficiary applies under regulation 159 for payment of the pension; and
b
the lump sum is a trivial commutation lump sum death benefit as defined in paragraph 20 of Schedule 29 to FA 2004.
6
A lump sum payable under this regulation is to be determined by the scheme manager after taking advice from the scheme actuary.