PART 7Retirement benefits
CHAPTER 6Payment options
Options under this Chapter118
The options under this Chapter are—
a
the option under regulation 120 to buy out the early payment reduction;
b
the option under regulation 121 to defer payment of a retirement added pension;
c
the option under regulation 122 (option to commute part of pension) to exchange part of a full retirement pension or ill-health pension for a lump sum;
d
the option under regulation 130 to exchange the whole of the members’ accrued pensions for a lump sum.
Exercising an option under this Chapter119
1
A member may exercise an option under this Chapter by written notice to the scheme manager in any form the scheme manager requires.
2
In this Chapter, “option notice” means a notice by which a member exercises an option under this Chapter.
Option to buy out early payment reduction120
1
This regulation applies if a member of this scheme claims payment of a full retirement pension under Chapter 2 (full retirement benefits) and—
a
if the member is an active member, the member has not reached normal pension age under this scheme; or
b
if the member is a deferred member, the member has not reached the member’s state pension age.
2
The member may opt under this regulation to buy out the early payment reduction that would otherwise apply to the calculation of the annual rate of full retirement pension.
3
The cost must be met by way of a special payment to this scheme made by the member.
4
The cost of buying out the early payment reduction is an amount determined by the scheme manager in accordance with actuarial guidance.
5
Any special payment made by a member must be made in accordance with the requirements of the scheme manager.
Option to defer payment of retirement added pension121
1
This regulation applies in relation to a member of this scheme who, on or after reaching normal pension age under this scheme, becomes entitled to the payment for life of a retirement added pension of any description.
2
The member may opt under this regulation to defer payment of the retirement added pension of that description.
3
A member who exercises the option under this regulation becomes a deferred member of this scheme in respect of the retirement added pension of that description and accordingly—
a
a deferred member’s account must be established under Part 5 (pension accounts); and
b
the amount of retirement added pension of that description must be specified in the deferred member’s account as the provisional amount of deferred added pension of that description.
4
The member is entitled to payment for life of the retirement added pension of that description when the member claims payment of that pension.
5
A member may only claim payment of a pension under this regulation by giving at least one month’s written notice to the scheme manager.
6
The notice must specify the date from which payment of the pension is claimed.
7
The annual rate of retirement added pension is calculated in accordance with regulation 66.
Option to commute part of pension122
1
A member who becomes entitled to the payment for life of a full retirement pension or ill-health pension under this scheme may opt under this regulation to exchange part of the pension for a lump sum.
2
An option under this regulation may only be exercised before the first payment of the pension is made.
3
If a member exercises the option, for every £1 by which the amount of the member’s annual rate of full retirement pension or ill-health pension is reduced, the member must be paid a lump sum of £12.
4
The lump sum may not be more than 25% of the amount advised by the scheme actuary as representing the cash value of the pension.
5
A member may not exchange pension for lump sum under this regulation to the extent that it would result in a scheme chargeable payment for the purposes of Part 4 of the 2004 Act (see section 241 of that Act)77.
6
If paragraph (7) applies, the member may opt to exchange only so much of the pension that exceeds the guaranteed minimum, multiplied by such factor as is indicated for a person of the member’s description in actuarial tables.
7
This paragraph applies if the member has a guaranteed minimum under section 10 of the 1993 Act78 in relation to the whole or part of a pension as a result of receipt by this scheme of a transfer payment from another pension scheme in respect of which the member had such a guaranteed minimum.