If the total value of your pension is less than £30,000, you might be able to swap your whole pension for a one-off lump sum.
There are some things you’ll need to think about. If you decide to swap your pension for a one-off lump sum, you won’t get any further payments from the Scheme. If you die, your spouse will not get a spouse’s pension.
Can I take a one-off lump sum?
You can swap your BCSSS pension for a one-off lump sum if:
- The total value of all your pensions is less than £30,000
- You’re over 50, or had to retire early because of ill health
OR
- The value of your BCSSS pension is less than £10,000, whatever the value of any other pensions you have.
- You have not been paid a one-off lump sum from any other pension scheme, except in a 12-month commutation period.
Your one-off lump sum may be affected by GMP
If you worked between 1978 and 1997, part of your pension could be GMP. If it is, you won’t be able to swap your pension for a lump sum until you reach your GMP payment age, which is 65 for men and 60 for women.
This won't apply to you if you left the Scheme before 1978.
How will my one-off lump sum be taxed?
The first 25% of your lump sum will be tax free. The rest will be taxed under the PAYE system, just like a salary. You won’t pay national insurance.
Your one-off lump sum may be affected by GMP
If you worked between 1978 and 1997, part of your pension could be GMP. If it is, you won’t be able to swap your pension for a lump sum until you reach your GMP payment age, which is 65 for men and 60 for women.
There is a limit on the amount of tax free cash you can take from all of your pensions
The Lump Sum Allowance (LSA) is a limit on the total amount of tax-free lump sum you can take from all your pension schemes (not including the State Pension). It’s set by the government. If you go over the LSA, you will have to pay tax on anything above the limit.
The government has set the LSA. It is currently £268,275. Most BCSSS members are unlikely to go over the LSA. But the law says that pension administrators must keep track of how much of the LSA is used up every time a member is paid a tax-free lump sum.
This means we ask all BCSSS members to complete their Lump Sum Allowance Form to tell us about any other tax-free lump sums they have been paid. We also ask about other pensions they are already receiving in case they can’t remember how much tax-free lump sums they have been paid in the past.
More information
If you would like to know more, please contact us. You can also find more information in HMRC's Pensions Tax Manual.