PSI8.2.14 - Lump Sum Benefits and Communication: Commutation Factors - Fixed Rate 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)

Fixed rate factors are not acceptable if they differ from the universal factors at PSI8.2.12(a). and (e). For example, a Life Office may contend that a scheme can give a man of 65 £10 for each £1 pension commuted because the policy by which the scheme is funded guarantees an annuity of £10 per £100 cash proceeds. Do not accept such an argument. A policy could be issued giving £50 cash for each £1 annuity if a sufficiently high premium were paid. The commutation factor for such a scheme should be based on appropriate interest and mortality assumptions as described in PSI8.2.4-7.

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