Retirement lump sums for members with service on or after 1 January 2007

5 December 2007 / Members

Introduction

If you have service in the Teachers’ Pension Scheme on or after 1 January 2007, you have the option to convert part of your pension for an additional retirement lump sum up to new limits allowed by HM Revenue and Customs (HMRC). The option to take a higher lump sum was one of several flexibilities introduced as part of the scheme reforms which came into force on the 1 January 2007, enabling you to take up to 25% of the value of your pension “pot”.

The new retirement lump sum Factsheet

The option to take a higher lump sum in place of pension is explained in a new factsheet which can be found in the Forms and Resources section of the Teachers’ Pensions website under Factsheets

Estimates for the maximum retirement lump sum allowed by HMRC

You may also obtain online an estimate of your maximum retirement lump sum by entering your pension details in the Pension and Lump Sum “ready-reckoner”, which can also be found on the Calculators section of the Teachers’ Pensions website.

Options for different levels of lump sum and pension below the maximum allowed by HMRC

You are not obliged to take the maximum lump sum at retirement and can take a lower level of lump sum and proportionately higher pension if you wish. If you are entitled to an automatic lump sum, you can opt to take a higher lump sum in a range between the standard amount (3 times your pension) and the maximum allowed. Your pension will vary accordingly.

For new entrants since 1 January 2007, there is no automatic lump sum but you have the option to take a level of lump sum anywhere between zero and the HMRC limit. Again the pension you receive will vary accordingly.

If you would like to consider different combinations of pension and lump sum, please access the link to the modeller spreadsheet.

Important note if you are coming up to retirement

Can I change my mind about the option to convert pension to lump sum?

Please refer to this section of the Frequently Asked Questions (FAQs).

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