1. What is a Pension Lump Sum Calculator (LGPS)?

Definition: This calculator estimates the lump sum amount you would receive from the Local Government Pension Scheme (LGPS) when giving up part of your annual pension.

Purpose: It helps LGPS members understand the lump sum equivalent when considering pension commutation options.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Lump Sum — One-time payment amount ($)
• Pension Given Up — Amount of annual pension you're willing to reduce ($/year)

Explanation: LGPS typically offers £12 of lump sum for each £1 of annual pension given up.

3. Importance of Lump Sum Calculation

Details: Understanding this conversion helps members make informed decisions about balancing regular pension income versus immediate lump sum payments.

4. Using the Calculator

Tips: Simply enter the amount of annual pension you're considering giving up to see the equivalent lump sum payment.

5. Frequently Asked Questions (FAQ)

Q1: Is the 12:1 ratio always applicable?
A: This is the standard LGPS commutation ratio, but check with your pension administrator as special circumstances may apply.

Q2: Are there tax implications for taking a lump sum?
A: Typically, 25% of your total pension pot can be taken tax-free, with the remainder subject to income tax.

Q3: When would I want to take a lump sum?
A: Common reasons include paying off debts, making large purchases, or if you have a shorter life expectancy.

Q4: How does this affect my survivor benefits?
A: Reducing your pension may also reduce benefits payable to your dependents after your death.

Q5: Can I change my mind after commuting pension?
A: Generally, commutation decisions are irreversible, so careful consideration is important.