PSI8.2.12 - Lump Sum Benefits and Communication: Commutation Factors - Acceptable Commutation Factors

(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)

There are a number of ways in which schemes may provide for commutation:

1. Fixed rate factors of 9:1 for men and 11:1 for women, or 9:1 for both sexes, these being without variation for age (see PSI8.2.13-14).

[PN7.43-44]

1. A specially calculated table, which is subject to review at intervals; continued approval of the scheme being dependent on the table being changed if any of the assumptions on which it is based are varied. Our agreement of such a table (see PSI8.2.41-49), may be for individual schemes or for groups of schemes administered by a particular Life Office. If a change to an agreed table becomes necessary it normally applies only to new schemes and future entrants to existing schemes. The rights of existing members will not usually be affected unless there is also a substantial increase in the scale of their benefits.

[PN7.46]

1. Individual calculations by a qualified actuary for every commutation. These must be consistent with other calculations made for the same individual and for other scheme purposes, as well as our general requirements for commutation factors (Appendix A).

[PN7.42]

1. Factors as in the ABI Table (see PSI8.2.24).

[PN7.2]

1. A fixed factor of 12:1 (see PSI8.2.2).

The above methods may be used only as indicated in the following table:

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