How much of my pension can I take as a lump sum?

For all three schemes, the tax-free maximum is 25% of the total pension value (subject to the HMRC Lump Sum Allowance — the abolished Lifetime Allowance replacement). Some schemes technically allow commutation beyond 25% but the excess is taxed as income in the year received, so almost nobody takes it.

What is the commutation factor and why does it matter?

The commutation factor determines how much lump sum you receive per £1 of annual pension surrendered. Higher factors = better deal for you. Factors are age-dependent (you get more per £1 at earlier ages because the actuary values the years of pension you're forgoing). They're published by the scheme actuary and change periodically.

Is commutation reversible?

No. Once you've taken the lump sum at retirement, the reduced annual pension is fixed for life. You cannot buy back your full annual pension by returning the lump sum. This is why the commutation decision is one of the most consequential retirement choices you'll make.

How does commutation differ between the schemes?

1987 scheme: automatic partial commutation on top of voluntary commutation. 2006 scheme: voluntary commutation with a fixed commutation factor. 2015 CARE: fully voluntary commutation with age-dependent factors. Each scheme has slightly different maxima and rounding rules. XPS or your scheme administrator gives an exact quote at retirement point.

Is the lump sum really tax-free?

Yes, up to the HMRC Lump Sum Allowance (£268,275 for 2024/25 — check current figure). Beyond that limit, the excess is taxable as income. The vast majority of police pension lump sums are within the allowance. Very-long-service or very-high-earning officers may want to structure carefully.

Should I take the maximum lump sum?

That's a personal financial-planning decision. Arguments for: tax-free cash, immediate use for a mortgage / debt / big purchase / investment. Arguments against: the annual pension you give up is a guaranteed inflation-linked income for life, and giving that up in exchange for a lump sum you might spend or invest badly reduces your lifetime security. Talk to a regulated financial adviser — this decision affects the rest of your life.

Police Pension Commutation Lump Sum

Trade some annual pension for a tax-free lump sum at retirement. How it works across all three schemes.

Unofficial independent resource — always verify with official sources (College of Policing, your force, PFEW).

Reviewed by the BlueLineHub Editorial Team

Last reviewed: 29 May 2026 · Next review due: 29 November 2026

Reviewed by BlueLineHub Editorial

What is commutation on a police pension?

Commutation is the option to trade in some of your annual pension for a tax-free lump sum at retirement. It applies across all three UK police pension schemes with slightly different rules. The maximum tax-free amount is set by HMRC as 25% of the total pension value (subject to the standard Lump Sum Allowance). The commutation factor — how much lump sum you get for each £1 of annual pension you give up — differs by scheme and by age at retirement.

What commutation actually is

At retirement your scheme quotes you an annual pension based on your pensionable service. Commutation is the choice to reduce that annual pension in exchange for a one-off tax-free lump sum. You lose the surrendered pension for life; you gain a large tax-free payment.

The maths behind it is actuarial: the scheme values the annual pension you're surrendering (age × expected lifetime × discount rate) and hands you the equivalent today. The commutation factor is the ratio: lump sum per £1 annual pension surrendered. Typical factors are around 12:1 to 20:1 depending on age and scheme — every £1 of annual pension you give up gets you £12-£20 in the hand today.

Scheme-by-scheme rules

Police Pension Scheme 1987

Automatic partial commutation: a proportion of the final-salary pension is automatically converted to lump sum at retirement.
Additional voluntary commutation on top of automatic — up to 25% of the total pension value.
Commutation factor set by the scheme actuary; typically age-dependent.
Full pension at 30 years' service; commutation applies to whichever pension you take.

Police Pension Scheme 2006

Voluntary commutation only — no automatic component.
Up to 25% of total pension value as tax-free lump sum.
Commutation factor fixed at 12:1 for members retiring at their deferred pension age.
Deferred pension age 55 with 5 years' service.

Police Pension Scheme 2015 (CARE)

Voluntary commutation only.
Up to 25% of total pension value as tax-free lump sum.
Age-dependent commutation factor — younger retirees get more lump sum per £1 of surrendered pension.
Deferred pension age tracks State Pension Age.

Worked example (illustrative only)

Officer retiring at age 60 from the 2015 CARE scheme. Full pension quoted at £22,000/year. Commutation factor at age 60: 15:1.

25% of pension value = £5,500/year surrendered.
Tax-free lump sum = £5,500 × 15 = £82,500.
Reduced annual pension = £22,000 − £5,500 = £16,500/year.

So the choice: £22,000/year for life vs £16,500/year for life + £82,500 tax-free lump sum today.

The break-even (in un-invested pounds) is 15 years — after which the un-commuted pension overtakes. Factor in mortality, investment of the lump sum, inflation and life circumstances and it becomes a personal financial-planning question.

The McCloud complication

If you're affected by McCloud, at retirement you'll get two quotes — one for legacy scheme benefits over the remedy period (April 2015-March 2022) and one for CARE scheme benefits over the same period. Each quote will have its own commutation option. The choice is made scheme-wise (legacy or CARE) and then commutation on the chosen package. See /pensions/mccloud-remedy.

Getting a proper quote

Your scheme administrator (XPS for most Home Office forces, or the Scottish/NI equivalents) will provide a formal retirement quote 6-12 months before your intended retirement date. That quote will show your annual pension at various commutation choices — typically no commutation, full-maximum commutation, and often intermediate options.

Take that quote to a regulated financial adviser who specialises in public-sector pensions. This is not a decision to make alone. The Federation can point you at financial advisers with police-pension experience, but the actual advice is from a regulated adviser, not the Federation.

/pensions — pensions pillar overview.
/pensions/2015-care — the current CARE scheme.
/pensions/mccloud-remedy — McCloud in detail.
/pensions/retirement-planning — the wider retirement-planning walkthrough.
/pensions/widow-survivor-pension — survivor benefits.

Frequently asked

How much of my pension can I take as a lump sum?: For all three schemes, the tax-free maximum is 25% of the total pension value (subject to the HMRC Lump Sum Allowance — the abolished Lifetime Allowance replacement). Some schemes technically allow commutation beyond 25% but the excess is taxed as income in the year received, so almost nobody takes it.
What is the commutation factor and why does it matter?: The commutation factor determines how much lump sum you receive per £1 of annual pension surrendered. Higher factors = better deal for you. Factors are age-dependent (you get more per £1 at earlier ages because the actuary values the years of pension you're forgoing). They're published by the scheme actuary and change periodically.
Is commutation reversible?: No. Once you've taken the lump sum at retirement, the reduced annual pension is fixed for life. You cannot buy back your full annual pension by returning the lump sum. This is why the commutation decision is one of the most consequential retirement choices you'll make.
How does commutation differ between the schemes?: 1987 scheme: automatic partial commutation on top of voluntary commutation. 2006 scheme: voluntary commutation with a fixed commutation factor. 2015 CARE: fully voluntary commutation with age-dependent factors. Each scheme has slightly different maxima and rounding rules. XPS or your scheme administrator gives an exact quote at retirement point.
Is the lump sum really tax-free?: Yes, up to the HMRC Lump Sum Allowance (£268,275 for 2024/25 — check current figure). Beyond that limit, the excess is taxable as income. The vast majority of police pension lump sums are within the allowance. Very-long-service or very-high-earning officers may want to structure carefully.
Should I take the maximum lump sum?: That's a personal financial-planning decision. Arguments for: tax-free cash, immediate use for a mortgage / debt / big purchase / investment. Arguments against: the annual pension you give up is a guaranteed inflation-linked income for life, and giving that up in exchange for a lump sum you might spend or invest badly reduces your lifetime security. Talk to a regulated financial adviser — this decision affects the rest of your life.