If you are a member of the 1995 / 2008 Scheme, or the 2015 Scheme and apply for a terminal illness lump sum we will work out your payment using the following steps:
If you were actively contributing to the scheme on or after 1 April 2008 we will calculate the maximum lump sum available to you using the standard commutation rate. Using this rate, for every £1.00 of your pension you give up, you receive £12.00 in your lump sum. We will apply this up to HMRC's pension commencement lump sum limits.
If you left the scheme before 1 April 2008 we will calculate your standard lump sum which will normally equate to three times your annual pension.
We will then convert the remainder of your pension using a different commutation rate. Using this rate, for every further £1.00 of your pension you give up, you receive £5.00 in your lump sum. We will apply this to all of your remaining pension.
If the payment of your lump sum exceeds your available lifetime allowance the excess will be subject to a lifetime allowance charge at the rate of 55%.
If you choose to exchange your pension benefits for a one off lump sum payment, your dependents will still be entitled to receive any survivor pension applicable to them however no death gratuity lump sum would be payable in this case.
If you wish to apply for a one off lump sum payment, you must complete an AW341 application form. You cannot change your request once your lump sum has been paid to you.
For further information, please see the Ill health retirement section of our website.