PP Police Pay

Police Pension
Commutation Explained

A complete, plain-English guide to how police pension commutation works, how lump sums are calculated, and what officers should consider before making a decision. Study the trade-offs below or use our interactive Commutation Modeller.

Trust Notice: Independent explanation of public pension rules. Not regulated financial advice. Not affiliated with any police force or pension administrator.

Executive Summary

Commutation allows police officers to exchange part of their annual pension income for a larger lump sum at retirement.

This is optional. Officers can choose to:

  • Take the standard lump sum (if applicable under their scheme).
  • Increase their lump sum by reducing their annual pension.
  • Or take less lump sum to increase pension income.

The Financial Trade-off

Higher immediate cash Lump Sum Advantage
Lower guaranteed lifetime income Ongoing Pension Reduction

The decision depends on retirement age, health, life expectancy, mortgage position, debt, other savings, and tax considerations. Once made, commutation choices are irreversible.

What Is Police Pension Commutation?

Commutation means exchanging part of your annual pension income for a lump sum at retirement.

1987 Scheme

Some lump sum may be automatic.

2006 & 2015

Some lump sum is optional.

Mechanism

Give up part of annual pension to increase lump sum.

The exchange rate is fixed under scheme regulations.

How Police Pension Commutation Works

When you retire, your pension is calculated first. You are then offered a standard pension, a standard lump sum (if applicable), and the option to increase the lump sum.

£

The Exchange Rate

For every £1 of annual pension given up, you receive a one-off lump sum calculated using a commutation factor.

Determinants

The commutation factor is determined actuarially and varies by Age at retirement and Scheme rules.

Finality

You cannot change your mind after the election is made.

Is the Lump Sum Tax Free?

25%

Up to 25% of the capital value of your pension benefits can normally be taken tax free.

Amounts above this may trigger tax consequences. Most officers take lump sums within tax-free limits. This is a key advantage of commutation.

Should You Commute Your Police Pension?

Reasons to Commute

  • Paying off mortgage
  • Clearing debt
  • Funding children's education
  • Investing elsewhere
  • Creating financial flexibility

Reasons Not To

  • Desire for higher guaranteed income
  • Concern about longevity risk
  • Inflation protection preference
  • Limited alternative income sources

This depends entirely on personal circumstances. Once commuted, the annual pension reduction lasts for life.

The Lifetime Trade-Off

When you commute pension, you receive cash immediately.

But you permanently reduce:

  • Annual pension income
  • Inflation-linked increases
  • Survivor pension (in some cases)

If you live a long retirement, the cumulative loss of income may exceed the lump sum received.

Trading long-term security for immediate liquidity.

Commutation Under Each Scheme

1987 Scheme

  • Automatic lump sum (typically 4x pension)
  • Option to commute further

2006 Scheme

  • No automatic lump sum
  • Lump sum created through commutation

2015 Scheme

  • No automatic lump sum
  • Entire lump sum created through commutation

Understanding your scheme is critical.

Decision Support

Commutation Consideration Checklist

Before commuting, ask:

Do I need the cash immediately?
Do I have other retirement income?
What is my expected retirement length?
Would I regret losing guaranteed income later?
Am I within tax-free limits?
Further Decision Analysis:
Use Commutation Modeller Is it Worth It? Schemes Explained

Contextual Analysis

Police Pay Scales 2026 Back to Pension Hub

Frequently Asked Questions

What is police pension commutation?

Police pension commutation allows officers to exchange part of their annual pension income for a lump sum at retirement.

How much lump sum can I take?

Typically up to 25% of the capital value of pension benefits can be taken tax free, subject to scheme rules.

Is the lump sum tax free?

Most lump sums fall within tax-free limits, but tax implications depend on total benefit value and current tax rules.

Can I change my decision later?

No. Once elected at retirement, commutation decisions are irreversible.

Does commutation reduce my pension permanently?

Yes. The reduction applies for life and affects annual inflation increases.

Calculator Tool

Model Your Exact Pension

Use our Police Pension Calculator to estimate your annual income under the 1987, 2006 or 2015 scheme — including early retirement reductions and McCloud impact.

Calculate My Police Pension

Final Assessment

Police pension commutation is not about right or wrong. It is about balance.

The scheme provides one of the strongest guaranteed incomes in UK employment. Reducing that income in exchange for cash must be weighed carefully.

For some officers, it creates flexibility.
For others, it weakens long-term security.

Understanding the mechanics is essential before making the decision.