Can I cash in my pension for a lump sum?

A pensioner may request that their annual pension benefit is compounded and paid as a one off lump sum payment.  There are two tests to determine if a compounded lump sum can be paid.

Test one for trivial commutation

  • A pension can only be commuted from age 55 or earlier if the ill-health condition is met.  The ill-health condition is that NILGOSC has received evidence from a registered medical practitioner that the member is and will continue to be incapable of carrying out their job because of physical or mental impairment and they have ceased to carry out their job. A male pensioner with a GMP will not be eligible to commute until 65.  A female with a GMP will not be eligible to commute until 60. Dependant’s pensions have no age restriction.
  • The pensioner must have available lifetime allowance and the total value of all the pension rights held in all pension arrangements including the LGPS (NI) must not exceed £30,000.
  • A dependant’s pension can only be commuted if the total value of each dependant’s pension must not exceed £30,000. All NILGOSC pensions must be commuted (not including pensions in their own right in payment).
  • All commuted payments made, from any scheme, must be made within a 12 month period.
  • The payment of commuted benefits extinguishes the rights to all benefits in the scheme, including contingent death benefits.

Test two for trivial commutation – ‘De minimis rule for pension schemes’

  • A pension can only be commuted from age 55 or earlier if the ill-health condition is met.  The ill-health condition is that NILGOSC has received evidence from a registered medical practitioner that the member is and will continue to be incapable of carrying out their job because of physical or mental impairment and they have ceased to carry out their job. A male pensioner with a GMP will not be eligible to commute until 65.  A female with a GMP will not be eligible to commute until 60. Dependant’s pensions have no age restriction.
  • The member is not a controlling director of a sponsoring employer of the scheme or of any related scheme, and is not a person connected to such a person.
  • The payment does not exceed £10,000
  • The payment does not exceed £10,000, for all NILGOSC benefits that are post 09 leavers (not including dependant’s pensions in payment). If you have a mix of pre and post 09 leaver pensions, small pot does not apply.
  • The payment extinguishes the member’s entitlement to benefits under this scheme.
  • No recognised transfer was made out of this or any related scheme in respect of this member during the 3 years preceding the date of the payment.