West Midlands Pension Fund - How can I increase my lump-sum at retirement

Contributing Member

How can I increase my lump-sum at retirement?

On retirement, you will be able to exchange some of your pension to receive a bigger tax-free lump-sum subject to HM Revenue and Customs limits. This would be achieved by exchanging part of your annual pension for a one-off tax-free cash payment – for every £1 of your annual pension you give up you will receive an extra £12 tax-free cash lump-sum.

You may not reduce your pension to below your guaranteed minimum pension (GMP) amount. You will be able to take up to a maximum of 25% of the capital value of your pension benefits as a tax-free cash lump-sum or, if lower, 25% of the lifetime allowance less an adjustment for the value of any other pension benefits you are already drawing.

Your pension will be reduced in accordance with any election you make to receive a lump-sum. Any subsequent pension for your husband, wife, civil partner, nominated cohabiting partner or children will not be affected if you decide to exchange part of your pension for a lump-sum.

Please click here to see an example of how Brenda can increase her tax-free cash by giving up annual pension at retirement.

However, there is a very tax efficient way that you can maximise your tax-free cash on retirement without using your annual pension which remember, is indexed-linked. If you build an AVC pot using our 'in-house' AVC provider Pridential, not only do you receive tax relief on your contributions but also as tax-free cash lump-sum on retirement providing you are within HMRC limits.

Please visit the AVC section on our website for more information on AVC's.

Please click here to see an example of how Brenda can increase her tax-free cash lump-sum by using her AVC pot at retirement.

In order to calculate your own maximum tax-free cash lump-sum on retirement please click here to the LGPS calculator.