RPSM09204030 - Member Pages: Member Benefits: Lump Sum Benefits: Authorised Lump Sum Payments

The authorised lump sum payments and the limits imposed on them

What are the different types of lump sum payments?

Lump sum payments from a registered pension scheme can either be authorised or unauthorised. Unauthorised lump sum payments are taxed very heavily. More detail about unauthorised lump sum payments is available at RPSM04104020 and RPSM04104040.

The authorised lump sum payments that a registered pension scheme can make are

• a pension commencement lump sum - see RPSM09100340 for details,
• a stand-alone lump sum - see RPSM03105155, RPSM03105202 and RPSM03105640
• a serious ill health lump sum – see RPSM09104600
• a refund of excess contributions lump sum – RPSM09104800,
• a trivial commutation lump sum – see RPSM09104900,
• payment of commuted equivalent pension benefits – see RPSM09105300
• a lifetime allowance excess lump sum – see RPSM09105200
• a short service refund lump sum – see , RPSM09104700 and
• a winding up lump sum – see RPSM09105100.

These payments are specifically defined in legislation and the legislation sets out the precise circumstances in which particular lump sums may be paid. Lump sums can also be paid on death, see RPSM10200000.

Are there any limits on the amount that can be paid as a lump sum?

This depends on the type of lump sum being paid out. Where a lump sum is limited, the limit is set out in the tax legislation. For example, the maximum level of pension commencement lump sum is limited to 25% of the total value of your benefits coming into payment at that time. This total value in turn is limited by your available lifetime allowance.