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Converting your pension to a lump sum

It is possible to convert some of your annual pension to provide a tax-free lump sum.

Your annual pension is reduced to provide a lump sum. For every £1 of annual pension that you give up you will receive an extra £12 of lump sum.

Any subsequent pension for your survivors will not be affected by your decision to exchange part of your pension for a lump sum. However, any lump sum death grant payable may be affected. The more lump sum you receive on retirement the less lump sum death grant will be payable on your death.

For membership in the scheme before 1 April 2008 you receive an automatic tax-free lump sum. There is no automatic lump sum for membership from 1 April 2008 but your annual pension is calculated using a higher accrual rate. You can convert some of your annual pension to provide a lump sum or increase your automatic lump sum.


You have 'Standard benefits' of:

  • Annual pension £2,500, and
  • Lump sum £6,000.

You give up £500 of your annual pension.
This amount converts to an additional tax-free lump sum of £6,000 (£500 x 12)

You will receive 'Converted benefits' of:

  • Annual pension £2,000, and
  • Lump sum £12,000.


You can take up to a maximum of 25% of the capital value of your LGPS benefits as a lump sum. The lump sum must not exceed 25% of the lifetime allowance (£268,275 in 2021/22) less the value of any other pension rights in payment.

The capital value of your pension benefits is worked out by multiplying your annual pension at retirement by 20 and adding in any automatic lump sum (payable if you were a member of the LGPS before 1 April 2008). If you paid in-house AVCs and you are taking these at the same time, this will also need to be added in.

If you paid into the LGPS before April 1997 you will have a Guaranteed Minimum Pension (GMP). You cannot reduce your annual pension to below this amount.

An Annual Benefit Illustration (ABI) is sent to you by the end of August each year. It gives you an update about your pension benefits. Find out about Annual Benefit Illustrations

We must use factors provided by the Government Actuary’s Department (GAD) for calculations. These factors can change from time to time.


Your option to convert some annual pension to lump sum is made in writing at the time you retire. It must be made before your last day of work.

Once you have chosen the amount you wish to convert you cannot change your mind. It is important that you receive an estimate of your benefits from us before you make this decision and leave work.

Your employer requests an estimate of benefits from us anytime within 6 months before your expected date of retirement so that you can make informed decisions. You cannot request an estimate yourself. The request must come from your employer as they provide us with your up to date pay details.

Find out about retirement and taking your pension