PSI8.2.1 - Lump Sum Benefits and Communication: Commutation Factors - General

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN7.2 and 7.40]
The amount of benefit which a member can take in pension and lump sum form are directly linked. At a member's retirement there is a sum of money available which represents the capital value of his or her total benefits. Therefore every pound taken in lump sum form reduces the money available to provide a pension. The pension is a continuing payment throughout retirement and so each £1 of pension has a greater capital value than the same amount of lump sum taken. We need to be satisfied that the amount of pension given up is reasonable when compared to the lump sum taken.

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