You might be able to swap your whole pension for a lump sum if you get less than £10 a week from your MPS pension.
You'll have the meet the criteria set out below. There are a few things you'll need to think about too.
If you decide to swap your pension for a one-off lump sum, you won’t get any further payments from the Scheme. If you die, your spouse will not get a spouse’s pension.
Can I take a one-off lump sum?
You can swap your MPS pension for a one-off lump sum if:
- You are over 55
- The total value of all your pensions is less than £30,000.
OR
- The value of your MPS pension is less than £10,000. This is the same as £10 a week or less. If this is the case, the value of any other pensions you have doesn’t matter.
- You have not been paid a one-off lump sum from any other pension scheme, except in a 12-month commutation period.
How will my one-off lump sum be taxed?
The first 25% of your lump sum will be tax free. The rest will be taxed under the PAYE system, just like a salary. You won't pay National Insurance.
Your one-off lump sum may be affected by GMP
If you worked between 1978 and 1997, part of your pension could be GMP. If it is, you won’t be able to swap your pension for a lump sum until you reach your GMP payment age, which is 65 for men and 60 for women.
This won't affect you if you left the Scheme before 1978.
More information
If you would like to know more, please contact us. You can also find more information in HMRC's Pensions Tax Manual.