Pension Commutation

[keiranpup]

Can somebody tell me what 'commutation' means in respect of pensions ?
I have a pension with my employer and have been given a statement stating two different figures one with maximum commutation and one without commutation

[voltr4m4x]

If you have worked for your employer for a number of years and qualify for pensionable service (usually a minimum of 25 years) you have the option to elect for a lump sum payment (tax free) to be paid direct to you as a proportion of your pension rated in terms of your final salary. That is basically the terms of "commutation". The Police/Fire Service Pensions are typical schemes that allow for this, but the calculation is based entirely on your final salary paid over the precediing 12 months and is highly complex and individualized. Seek advice.

However, if you do accept to receive a lump sum by way of commutation your weekly/monthly private pension paid through your employers contribution scheme is considerably reduced, so do be aware of that.

[dzug]

To put it more simply, you exchange part of your pension that is due to be paid for you for life for a tax free lump sum paid now.