Police pension lump sum (commutation) calculator 2026

May 2026 Treasury / SCAPE update · checked September 2026

HM Treasury raised the SCAPE discount rate from CPI + 1.7% to CPI + 2.0% on 19 May 2026, and GAD issued new 1987 commutation factors that came into force on 21 May 2026. Each £1 a year of 1987 pension given up now buys between about 3.7% (at 60) and 5% (at 50) less lump sum; the NPCC put it at "around 5%". The annual pension itself is not cut.

Source: GAD letter to the Home Office of 21 May 2026 (Appendix A, Table 1) and GAD's consolidated factor workbook (table 505); previous factors from GAD's guidance of 3 April 2023. Where the HMRC tax-free limit is what caps your lump sum, the maximum tax-free amount fell by only about 1%; where the 2.25 times cap applies, the lump sum is unchanged but more pension has to be given up for it.

Affected area

1987 lump-sum commutation

Not affected directly

Accrued annual pension

Modelling action

Use current administrator figures

The 1987 option in the calculator above looks up the GAD factor for the age you enter from the table in force from 21 May 2026. Exact figures still depend on your age in months, service history, retirement route and your administrator's calculation.

Federation position

After taking legal advice, the Police Federation of England and Wales says there is no general legal challenge to the new factors. It says officers who made an irrevocable choice of benefits before the change and retired on or after 21 May 2026 may have a maladministration complaint, through their force's internal dispute resolution procedure and then the Pensions Ombudsman. The calculator uses the factors in force.

Illustrative example: a 2015 scheme member giving up £2,000 a year of pension at the fixed £12 per £1 rate receives £24,000 in upfront cash and £166.67 a month less pension before tax. The same £2,000 a year of 1987 pension given up at exactly 55 would produce £46,440 at the GAD factor of 23.22.

Annual pension given up

£2,000 a year

Commutation factor

12 : 1

Tax-free lump sum

£24,000

Monthly pension reduction

£166.67 a month

In simple terms, commutation is a transaction. You agree to permanently reduce your monthly retirement income in exchange for a one-off tax-free cash payment. The rate at which the scheme exchanges monthly income for lump sum cash is called the commutation factor.

How police pension commutation is calculated

The calculation uses three things:

Annual pension given up

The amount of yearly income given up.

Commutation factor

Fixed at 12 by the 2015 regulations; a GAD table factor by age for the 1987 scheme.

Tax-free lump sum

Annual pension given up multiplied by the factor, tax-free up to HMRC's maximum of 20fg / (20 + 3f) and the £268,275 lump sum allowance.

Under the Police Pensions Regulations 2015 (regulation 124), the exchange rate is fixed at 12 to 1: for every £1 of annual pension you give up, you are paid a lump sum of £12. The lump sum cannot be more than 25% of the cash value of the pension as advised by the scheme actuary, and GAD's provisional maximum is 35.7% of the pension for retirements at 55 to 67. The 2006 scheme does not use 12:1: it pays an automatic lump sum of four times the pension, which can be exchanged for extra pension but not increased.

Give up £1,000 a year of pension = receive £12,000 upfront cash.

Is 12:1 good value?

For comparison only: GAD's 1987 factors, the scheme actuary's valuation of £1 a year of CPI-linked police pension, are 23.22 at 55 and 20.61 at 60 (tables in force from 21 May 2026), against a fixed 12 in the 2015 scheme. GAD also notes that a commuted lump sum may be lower than the cost of buying the same CPI-linked income from an insurer. At 12:1 the lump sum equals 12 years of the pension given up, before tax and pension increases.

Value is personal, though. If a lump sum lets you clear a high-interest mortgage, build an emergency fund or pay for something you need now, the cash can matter more to you than the strict comparison.

The legacy 1987 Police Pension Scheme works differently. Instead of a fixed 12:1 factor, the lump sum is the actuarial equivalent of the pension given up, from tables prepared by the Government Actuary (reg B7(7)), based on your age in years and completed months when the pension starts. You can give up to a quarter of the pension; with an ordinary pension and under 30 years' service the lump sum is also capped at 2.25 times the pension (reg B7(4)). New factors linked to the Treasury SCAPE change came into force on 21 May 2026.

Commutation is usually permanent. Weigh these trade-offs before you decide:

Common commutation mistakes to avoid

1. Treating the cash as free money

Every pound of lump sum cash comes from giving up pension, so your monthly income is lower for life.

2. Disregarding indexation

Giving up CPI index-linked pension means losing inflation-protected income over 20 to 30 years of retirement.

3. Ignoring dependant benefits

In the 1987 scheme, survivor pensions are worked out ignoring commutation. For the 2015 scheme, check with your administrator how commutation affects the survivor's pension.

4. Forgetting McCloud remedies

Remedy choices change how much of your pension is 1987, 2006 or 2015 benefit, and each part follows its own lump sum rules.

For the wider picture, read the police pension commutation guide.