First, any decision you make — whether staying in the plan, commuting to cash or a copycat annuity, or transferring your pension benefit to a new pension plan — should be made in the context of your overall goals. This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice.
A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change.
No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates. Commutation shall become absolute on the date of application by Government employee or from the date following the date of retirement which ever is later or at the end of the 3 months after the issue of authorisation by the Accountant General for payment of commuted value of the pension or date of next birthday of pensioner whichever is earlier.
A Commutation once given effect to can not be rescinded and commuted portion restored on refund of its capitalised value. If the pensioner dies on or after the day following that on which commutation took effect but before receiving the commutation value, such value shall be paid to his heirs. Rules provides for nomination to receive commuted value of pension in the event of the death of the pensioner.
Commutation is not permissible in cases of employee who retires without prejudice to the pending disciplinary proceedings. If the proceedings are finalised with punishment, commutation shall be allowed based on the date on which final orders are issued.
Where he is exonerated, commutation shall be allowed on the original application and value will be decided with reference to the age at the time of retirement. Payment of a trivial commutation lump sum is not a Benefit Crystallisation Event, but the member needs to have available lifetime allowance for the payment to be made. Julian and our Pension Administration team are keen to hear from you if you have any questions about commutation or group occupational pension schemes. Please note that the commutation of benefits including GMP on triviality is subject to the scheme rules allowing for such commutation to take place.
The scheme rules should be checked to ensure they have been updated to reflect the new limits. With effect from 1 December , assuming that scheme rules have been amended to allow for it to take place, it is possible for a member to commute their entire benefits from an occupational scheme in return for a one-off 'small lump sum'. There are certain types of pension that cannot be given up to provide a lump sum.
These include:. With effect from 6 April , the abolition of contracting-out on a defined contribution basis means that protected rights are no longer categorised as a separate class of benefits.
Therefore, previous restrictions on these benefits no longer apply and such benefits can be treated in the same way as contracted-in benefits. Please note that this change in legislation does not override scheme rules and therefore restrictions may still remain unless scheme rules have been updated accordingly. Individuals often find it difficult to decide whether to take a cash lump sum at retirement and from a financial perspective this does represent something of a gamble unless you know how long you are going to live!
For most people it will come down to a matter of personal choice. Expectations from Pensioner. Defence Pension Adalat. Photo Gallery. Download Forms. Related Links. Commutation A Defence civilian pensioner who retired on or after 1.
Model Calculation: Commutation The lump sum amount of commuted value of pension is calculated with reference to purchase value for the each next birthday as laid down in the Table of values prescribed from time to time and applicable to the applicant on the date commutation become absolute.
In case where individual applies for commutation of pension before the date of his retirement, the commuted value becomes payable on the day following the date of retirement and the reduction in the amount of pension on account of commutation shall be operative from its inception. Restoration of commuted amount of pension The commuted amount of pension is restored after 15 years from the date of commutation or the date from which reduction in pension was made by the PDA.
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