Planning Your Retirement - THE LOCAL GOVERNMENT PENSION ...

Options onRetirementTaking a bigger lump sumInstead of taking the standardbenefits package, you can take abigger tax-free lump sum by givingup some of your annual pension.You can take up to 25% of thecapital value of your LGPS benefitsas a lump sum. The CapitalValue is calculated as follows:Total Pension (old plusnew Scheme pensions) x 120/7Plus Automatic lump sum x 10/7Every £1 of annual pensionthat you give up will produce anadditional £12 lump sum. In thesame way, giving up £100 ofyour annual pension would giveyou an extra £1,200 lump sum.An option to take a bigger lumpsum has to be made in writingusing a Retirement Declarationform (LGP1b) before your benefitsare paid. To ensure you have plentyof time to make up your mind andseek financial advice if you wish,it is important you contact youremployer well in advance of yourintended retirement date to requestan estimate of your LGPS benefits.In converting pension for extralump sum, your pension maynot be reduced below the levelof your Guaranteed MinimumPension (GMP – see page 18).Any future dependants pensionsthat may become payablewould not be affected by youtaking extra lump sum.ExampleA member with a standard benefit package of an annual pension of£7,000 and a lump sum of £9,000 goes for the option of a biggerlump sum, and decides to give up £300 of annual pension.The benefits would be: Annual Pension: down by £300 to £6,700Lump Sum: up by £3,600 to £12,60013