Members of the Police Pension Scheme 1987 must attain 30 years’ pensionable service (or at the age of 55 or 60 for County Inspectors and above if that comes before 30 years) in order to be eligible to commute up to 25% of the value of their pension and have access to the full commutation factors. Any members who retire before achieving maximum service but reaching 25 years’ service across the schemes will have their commutation restricted to 2.25x the value of their gross pension.

PFEW have long lobbied for the removal of the commutation cap, alongside the Police Superintendents Association and Chief Police Officers Staff Association. It should be noted that regulations already permit chief constables to disapply the cap at their discretion, but this discretion is rarely (if ever) utilised. 

One of the main barriers to resolving this problem comes down to funding. To explain, commuting pension for a lump sum is calculated on an actuarially neutral basis. This means that the value of the pension given up is the same overall value as the lump sum provided.

The Home Office have made clear that if a chief constable exercises their discretion not to apply the cap, then the ‘additional’ funds required for the lump sum (i.e. the difference between the 2.25x and the 25%) must be met from existing budgets. PFEW have long argued that this stance is illogical, as effectively forces would be double paying for the ‘additional’ portion of the lump sum – because they (and the member) have already paid all required contributions towards the member’s benefits.

In addition, legal advice has been sought on several occasions but no viable challenge has been identified. The issue with the commutation cap has been raised on numerous occasions over the years. It is disappointing that we have not been able to successfully argue for the cap to be removed, but this is not for lack of trying by PFEW.