Will My Police Pension
Lump Sum Be Reduced?

In May 2026, the financial framework governing public sector pensions in the United Kingdom experienced a major administrative adjustment. On 19 May 2026, HM Treasury adjusted the Superannuation Contributions Adjusted for Past Experience (SCAPE) discount rate to CPI + 2.0% per annum, changing the valuation of national pension obligations. The Government Actuary's Department (GAD) then issued updated 1987 commutation factor tables, which came into force on 21 May 2026 and replaced those of 3 April 2023.

This update lowered the factors used to convert 1987 annual pension into a lump sum: for example from 26.90 to 25.55 at age 50 and from 24.30 to 23.22 at 55. HM Treasury had revised its CETV guidance with immediate effect, so transfer values and 1987 lump sums at retirement were paused until the new factors were issued (GAD; NPCC). Our guide to why quotes were suspended has the full timeline.

The sudden adjustment meant that any officer retiring under the legacy Police Pension Scheme (PPS) 1987 after the implementation date would receive less cash in their lump sum for the same portion of annual pension surrendered. The reduction is about 3.7% to 5% for each £1 of pension given up, depending on the officer's exact age (the NPCC said around 5%). This created concern, with some officers worrying that their earned benefits were being cut; they were not.

The most critical point for concerned officers is that the May 2026 change did not reduce their annual pension: the NPCC confirmed that the pension you have built up and pensions already in payment are not reduced, and scheme rules have not changed. For the 2015 scheme, section 23 of the Public Service Pensions Act 2013 also requires the consent of affected members or their representatives before regulations can make retrospective changes with significant adverse effects on pensions.

Your annual pension is a guaranteed monthly income stream paid from your retirement date until your death. The formulas used to calculate this income are unchanged, based on your final salary and service history for legacy schemes, or career average earnings for the CARE scheme (a 2015 pension taken before 60 is reduced by early payment factors, which were revised from 1 August 2026).

Additionally, your annual pension remains index-linked to the Consumer Price Index (CPI), ensuring it rises with inflation each year to maintain its purchasing power. The May 2026 adjustments do not touch this ongoing income stream; they only adjust the option to exchange a portion of this income for cash.

To understand why your cash lump sum falls while your annual pension remains the same, we must examine the concept of actuarial neutrality. Under the legacy PPS 1987 rules, you can choose to surrender up to a quarter of your annual pension for a lump sum; with an ordinary pension and under 30 years' service the lump sum is also capped at 2.25 times the pension (reg B7(4)).

The scheme does not simply give you this cash as a bonus. Instead, it calculates the lifetime value of the annual income you are giving up. Actuarial neutrality is the principle that the lump sum you receive should be equal in value to the projected lifetime stream of annual payments you surrender.

Because the Treasury adjusted the macroeconomic discount rate, it changed the formula used to calculate this present-day value. A higher discount rate discounts future payments more heavily. In simple terms, the cash value of those future annual payments is calculated as being lower today, resulting in a lower cash conversion factor.

The SCAPE discount rate stands for Superannuation Contributions Adjusted for Past Experience. It is a macroeconomic interest rate set by HM Treasury to place a present value on future public sector pension liabilities.

Since the police pension is an unfunded scheme, paid out of current tax revenues rather than a pool of investments, the government needs a way to evaluate the long-term cost of pension promises made to officers today. The SCAPE rate serves as an inflation-adjusted discount rate tied to long-term projections of the UK's economic growth.

Think of the SCAPE rate as compound interest running in reverse. If the government promises to pay you a sum in the future, they apply a discount rate to find out what that promise is worth today. When the discount rate is increased, the present-day cash value of that future promise drops. When they lower it, the cash value rises.

The Government Actuary's Department (GAD) translates the macroeconomic SCAPE rate into practical, individual-level tables. These tables are the commutation factors.

A GAD commutation factor is a multiplier. It tells you exactly how many pounds of tax-free cash you will receive for every £1 of annual pension you choose to surrender. For example, at exactly 55 the factor in force from 21 May 2026 is 23.22, so surrendering £1,000 of annual pension generates £23,220 of lump sum.

These factors are determined by several actuarial assumptions, including mortality tables (which estimate how long you will live in retirement) and the SCAPE discount rate. Because the 1987 regulations require the lump sum to be the actuarial equivalent of the pension given up (reg B7(7)), GAD reviewed the factors after the SCAPE rate rose and lowered them, reducing the cash generated per pound of pension surrendered.

The May 2026 adjustments do not affect all officers equally. The primary group impacted consists of members of the legacy Police Pension Scheme (PPS) 1987 who retire after the new factors took effect on 21 May 2026.

Within this group, younger retirees feel the reduction most heavily in absolute cash terms. In the 1987 scheme, commutation factors are higher for younger officers because they have a longer life expectancy in retirement, meaning the pension they give up would have been paid for longer. The factor fell by about 5.0% at age 50 (26.90 to 25.55) and about 4.0% at 57 (23.10 to 22.17), so the cash reduction is larger for an officer retiring at 50.

The more 1987 pension an officer commutes, the larger the cash difference, unless the 2.25 times cap or HMRC's tax-free limit already caps their lump sum: then the tax-free maximum falls by about 1%, or (at the 2.25 times cap) the lump sum stays the same but costs more pension. If you plan to commute little or no pension, the impact is small.

The 2015 Police Pension Scheme (CARE) lump sum rate is not affected by the GAD commutation factor update, because its commutation rules are structured differently. Other 2015 factors did change, as explained below.

Under the Police Pensions Regulations 2015 (regulation 124), the commutation rate is fixed at 12:1: for every £1 of annual pension you choose to surrender, you receive £12 of lump sum, up to 35.7% of the pension. Because this ratio is written into the regulations, it did not change with the SCAPE review. However, if you take your 2015 pension before 60, the early payment reduction uses GAD factors, and new ones came into use on 1 August 2026.

However, transition officers who have accrued service in both the legacy 1987 scheme and the 2015 scheme will see the new GAD factors apply to the legacy portion of their pension if they choose legacy benefits for the McCloud remedy period.

Yes, GAD commutation factors are not fixed permanently. They are updated whenever the Treasury reviews the SCAPE discount rate or when mortality assumptions change.

The SCAPE rate is reviewed periodically by the Treasury to align public service pensions with long-term economic growth projections. Mortality assumptions are also updated as life expectancy trends change. A future review could result in commutation factors increasing or decreasing.

Before May 2026, GAD last issued 1987 commutation tables on 3 April 2023 and before that on 31 October 2018. GAD says there is no set timeframe for its reviews, which can be prompted by changes such as longevity, and it does not release details until new factors are issued, when they take effect.

Some officers have considered early retirement to secure factors before any further changes. However, this decision must be evaluated carefully, as early exit often results in significant financial trade-offs.

If you retire early, you stop accruing pensionable service and final salary increases. In the 2015 CARE scheme, you lose the active revaluation boost, which revalues your pension at CPI + 1.25% during active service, compared to flat CPI in deferment or retirement. You may also face actuarial reductions for exiting before normal pension age.

The 1987 factors already changed on 21 May 2026, so retiring now does not get the old ones back. Whether working longer is worth more than any future factor change depends on your own figures: ask your administrator for quotes at different dates before making an irrevocable decision.

To illustrate the impact of the May 2026 adjustments, here are five illustrative scenarios (not real cases) covering different ages and schemes. 1987 factors are GAD's at exact ages, from the tables of 3 April 2023 and 21 May 2026.

Commutation is the process of surrendering a portion of your lifetime annual pension income in exchange for a single lump sum at retirement (1987 and 2015 schemes). Under HMRC rules, the maximum tax-free lump sum is generally limited to 25% of the total Capital Value of your pension benefits, and lump sums count against the £268,275 lump sum allowance.

To determine this limit, HMRC uses the Capital Value formula. The capital value is calculated by multiplying your post-commutation annual pension by 20 and adding the lump sum. The tax-free cash cannot exceed 25% of this total value, which works out as 20fg / (20 + 3f), f being the commutation factor and g the pension before commutation (PTM063240).

The part of a lump sum above this limit is not tax-free; unless it falls within another authorised payment it is an unauthorised payment, charged at 40% with a 15% surcharge in some cases (PTM063210, PTM131000). In the 1987 scheme, commuting the full quarter still breaches the limit whenever the factor is above 20, which under the May 2026 tables is every age up to 61, so the limit matters as much as before.

Several rumors have circulated across forces since the May 2026 GAD table adjustments. It is vital to separate fact from canteen speculation.

First, some officers believe their entire pension is being cut by 5%. This is false. The NPCC confirmed pensions built up and in payment are not reduced; what changed are actuarial factors, chiefly the 1987 commutation factor, so the lump sum for each £1 commuted is lower.

Second, there is a belief that the police pension fund is in deficit. Police pensions are unfunded schemes paid out of general taxation, so there is no private investment fund to go into deficit.

Finally, some fear that spouse or survivor benefits will be reduced if they choose to commute. In the 1987 scheme they are not: survivors' pensions are calculated ignoring the commutation reduction (Schedule C). In the 2015 scheme, ask your administrator how commutation is treated, because we could not confirm it from regulation 139 alone.

If you are approaching retirement or planning your pension strategy, you should take several systematic steps.

Start by requesting an updated formal pension forecast from your force's pension administrator. This will provide you with a written estimate based on the new GAD factor tables.

Review your McCloud Remedy position. Assess whether legacy PPS 1987 benefits or reformed CARE benefits for the remedy period yield a better financial outcome.

Use modelling tools, such as our free commutation calculator (which uses the GAD 1987 factors in force from 21 May 2026 and shows the HMRC tax-free maximum), to compare retirement dates and commutation levels. For a decision this large and permanent, consider regulated financial advice before making any final decisions.