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Commutation

Following Pension Reforms all members who were contributing members in the scheme on or after 1st April 2008, have the option to commute part of their pension either to increase their tax free lump sum, or to obtain a tax free lump sum.  The following information may be useful, however, in calculating how commutation is calculated.  

1995 Section 

If you were a member of the scheme prior to 1st April 2008 and have not opted to move to the 2008 Section through the Choice Exercise, you will receive a pension and tax free lump sum on retirement.  However, you also have the option to commute part of your basic pension amount to increase your lump sum.  The amount of additional lump sum you may receive is limited to 25% of your fund value.  The formula for calculating the maximum amount of lump sum that can be paid is as follows:

(Pension x 20) + (Lump sum x 20/12)

4.6667 

2008 Section 

If you joined the scheme on or after 1st April 2008, there is no automatic entitlement to a lump sum.  However, you can opt to commute part of your pension in order to receive a lump sum.  The formula for calculating the maximum amount of lump sum you may receive is calculated as follows:

Pension x 20

4.6667

The resulting figure represents 25% of the fund value and is the maximum lump sum you may take.  A member can choose the amount of lump sum they are paid up to the 25% maximum.  In doing so there is a consequent reduction in the value of the annual pension.  For each £1 of pension commuted there will be £12 of lump sum paid. 

Link to Scottish Government Website