CHAPTER 6Payment options
Options under this Chapter
118. 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 Chapter
119.—(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 reduction
120.—(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 pension
121.—(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 pension
122.—(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)(1).
(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 Act(2) 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.
Section 241 was amended by the Finance Act 2006 (c.25) Schedule 21 paragraphs 2 and 9, the Finance Act 2007 (c.11) Schedule 19 paragraphs 1 and 15 and the Finance Act 2011 (c.11) Schedule 16 paragraphs 62 and 74.
Section 10 was amended by the Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213) Arts.147, 168, Sch.3 para 20, Sch 5 Pt III, the Social Security Contributions (Transfer of Functions etc.) (Northern Ireland) Order 1999 (S.I.1996/671) Art.3(1) para 41 and the Proceeds of Crime Act 2002 (2002 c.29) para 23(3).