Your pension benefits
Find answers to our most frequently asked questions about leaving and joining a scheme.
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Your pension benefits
Typical benefits associated with your pension may include:
• A guaranteed annual income when you retire.
• The option of a flexible lump sum payment when you retire.
• A lump sum (known as a death grant) payable to a nominated beneficiary in the event of your death (up to a certain age).
The additional benefits associated with your pension may include:
- The option to increase your pension contributions (with AVCs or APCs).
- The option to decrease your pension contributions (for Local Government members) by joining the 50/50 scheme, depending on your scheme.
- The option to retire early for reduced benefits (the age varies, depending on your scheme).
- The option to delay your retirement (up to the age of 75) and receive increased benefits.
Your benefits are calculated based on your earnings and how long you’ve been in the scheme, from when you set up your pension until your agreed retirement date. They are also adjusted in line with inflation.
The easiest way to get an estimate of your pension benefits is by using our online calculator, which you can access via your online account (on most schemes).
Yes, we calculate your benefits based on information your employer passes to us. So, if they provide us with further information after the original calculation, such as reduced working hours, we would adjust them accordingly.
After receiving your first pension payment, your pension benefits won’t change other than any inflation related increases.
Your benefits are paid monthly in arrears, usually at the end of the month.
Depending on the day of the month you start to take your pension, you will receive your first payment either at the end of the current month or the following month. This will include any arrears dating back to your retirement date.
Lump sum pension payments
It’s when you take part of your pension as a one-off cash payment, instead of receiving all of it in monthly instalments (also known as a ‘pension commencement’ lump sum).
It depends on your scheme. Rather than taking all of your pension as an annual income, many schemes let you take up to 25 per cent of the value of your pension as a tax-free lump sum when you retire.
On most schemes, for every pound that you take from your annual pension income, you receive £12 towards your lump sum payment – up to 25 per cent of your total pension value.
For police and firefighters in legacy pension schemes (older schemes – the 1987 Police and 1992 Firefighters’ Pension Scheme), what you receive is dependent on your age (in years and days) when you decide to take your benefits.
You should receive your lump sum before your first pension payment, which is usually at the end of the month of your retirement date. Please note, this could be the following month, depending on when we receive your completed forms.
Yes. A (pension commencement) lump sum is an amount of money that makes up part of your pension, which you can choose to receive when you retire. A death grant is an additional sum of money that can be given to your loved ones in the event of your death.
Following a change in the pension lump sum factors in 2011, if a member chooses to receive more than their maximum lump sum limit, a type of tax charge called a scheme sanction charge must be paid. This is in addition to an unauthorised payment charge, which is applicable when the lump sum payment is above the HMRC threshold.
Some police forces have been passing the charge onto their officers, but Lancashire Constabulary pays this tax charge directly.
One-off lump sum (trivial commutation)
It depends if you meet certain criteria and on the size of your Local Government, Police or Firefighters’ pension, as trivial commutation is only available for small pension pots. To find out more, see our FAQ, Who is eligible for trivial commutation?
The UK government has set strict rules around who can ‘trivially commute’ their Local Government, Police or Firefighters’ pension (take it all as a one-off lump sum), depending on factors like your age and when you started paying into your scheme.
Please be aware that the total figure of all your pensions combined (not including your State Pension) cannot be more than £30,000 and you must take them all within 12 months. You’ll receive one single payment, instead of monthly payments, which will be taxed (although you may be able to receive the first 25 per cent tax free). Your spouse or partner also won’t receive any survivor’s benefits in the event of your death.
Guaranteed minimum pension (GMP)
GMP stands for Guaranteed Minimum Pension (GMP). It is a sum of money that is paid to members of occupational pension schemes, who were contracted out of the State Earnings Related Pensions Scheme (SERPS) between 6 April 1978 and 5 April 1997.
GMP ensures members receive a pension that’s as good as the pension they would have received under SERPS. It’s paid as part of your scheme benefits (not in addition to them).
Find out more about GMP here.
You will have a GMP if you paid into your occupational pension scheme before 5 April 1997 (GMP stopped being built up from 6 April 1997). If you have a GMP, it will be paid to you as part of your pension when you reach age 60 (for a woman) or 65 (for a man).
Find out more about GMP here.
GMP is paid as part of your occupational pension scheme benefits, not in addition to them.
Who is responsible for paying increases on the GMP portion of your pension may be shared between your occupational scheme and the government, depending on your dates of service and when you reached state pension age. If the responsibility falls with the government, GMP increases are paid as part of your state pension.
Find out more about GMP here.
Increasing and decreasing your benefits
Yes, depending on your scheme, you may be able to take Additional Pension Contributions (APC) or Additional Voluntary Contributions (AVC) to increase your benefits. Most schemes will allow you to take out an APC. Plus local government schemes will also allow you to take out an ‘in house’ AVC.
Yes, depending on your scheme, you may be able to take the 50/50 option to decrease your contributions costs. Just be aware that this will also decrease your pension benefits. It’s always worth speaking to a financial adviser before making any changes.
Strictly speaking, there is no limit on the amount of pension contributions you can pay, but there is a limit on how much pension you can build up before paying tax. See the FAQs on annual allowance and lifetime allowance for more information.
