You can commute some of your pension if you were actively contributing to the NHS Pension Scheme on or after 1 April 2008.

Commuting your pension is where you reduce your annual pension to receive a larger lump sum.

The rate of exchange is £12 lump sum for every £1 of annual pension commuted.

Maximum lump sum

The maximum lump sum you can take is 25% of the capital value of your pension.

The maximum lump sum you can take tax free is restricted to 25% of the Lifetime Allowance (LTA) set by HM Revenue and Customs (HMRC).

The LTA applies to all your pension arrangements, including any pension benefits from other schemes.

The current LTA is £1,073,100. This means the maximum tax free lump sum is currently £268,275.

If you previously applied and was granted protection from HMRC, your maximum tax free lump sum may be different.

Membership in more than one scheme

Membership in the 1995 and 2008 Section which have remained separate will be treated separately.  
If you have membership in the 2015 Scheme and 1995 or 2008 Section, a separate decision about commutation can be made. This does not include if you’re claiming ill health retirement benefits.

Ill health

If you’re claiming your benefits on the grounds of ill health, you’ll only be able to commute some pension from both schemes together. You cannot commute pension from one scheme and not the other. The lump sum decision must be the same for each scheme. 

Commutation calculator

You can use the commutation calculator on our website to estimate the maximum lump sum that is available to you.

You’ll need to know your estimated pension and lump sum amount at retirement.

Employers with access to our estimate tools can provide this for you.
If you’re taking Voluntary Early Retirement with actuarially reduced benefits, the reduced benefit amounts must be used.

Death benefits

If you opt to commute some of your pension, this will not change the level of pension benefits payable to your partner or dependants on your death.
This may affect the calculation of the lump sum on death benefit because the total amount of lump sum that you were paid on retirement will be used to work out  if any lump sum on death benefit is payable.

How to calculate capital value

Your capital value is calculated after commutation has taken place. This is done by multiplying your reduced annual pension by 20 and adding your total retirement lump sum.
How to calculate your maximum lump sum entitlement

1995 Section

Multiply your annual pension by 5.36.

2008 Section and 2015 Scheme

Multiply your annual pension by 4.28.

For further information, visit our website.

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