Choosing a lump sum at retirement

If your normal pension age in the Scottish Teachers' Superannuation Scheme is 60, as well as a lump sum of three times of the annual pension amount, you have the option to commute part of your pension to increase your lump sum up to a maximum of 25% of your fund value.

Every £1 you deduct from your pension will increase your lump sum amount by £12. The formula for calculating the maximum amount you can commute is as follows:

[Pension x 20] + [Lump sum x 20/12]

If your normal pension age in the Scottish Teachers' Superannuation Scheme is 65 or you're in the Scottish Teachers' Pension Scheme 2015, you won't receive an automatic lump sum.

You do, however, have the option to commute part of your pension to take up to 25% of the value of your fund as a tax-free lump sum. To calculate the maximum of commutation you would be allowed to take the following method would be used:

Pension x 20

You must make your decision about the amount of lump sum you wish to take before you complete your pension application form. Once your pension is in payment you can't change the amount.

You can explore various permutations of lump sum and annual pension using our pension calculator.

Pensionable salary

If you left service before 1st April 2007 your pensionable salary is:

  • the highest amount of full time equivalent salary for any consecutive 365 days of reckonable service, whether continuous or not, during the last three years of reckonable service. Reckonable service is those years and days that count towards your pension benefits. 

If you're a Scottish Teachers' Superannuation Scheme member, your pensionable salary is the better of the following:

  • The salaries for the last ten calendar years may be increased to current day value using index linking. The average of the best consecutive three years re-valued salaries in those ten calendar years is used.
  • The full time equivalent pensionable salary received in the last 12 months before the date of retirement.

If you’re a member of the Scottish Teachers' Pension Scheme 2015 when you retire and have final salary benefits then the salaries you’ve earned in the STPS 2015 will be used. If you have had a break in service after 1 April 2015 of more than five years then the salaries used will be those at the time of the break.

The salary used to calculate your retirement benefits may be restricted if your salary is increased by more than 10% plus the standard increase during any financial year in your last three years of pensionable employment before retirement and your last year’s salary is used as the pensionable salary and your employer is not prepared to meet the cost of the difference in benefits. If your employer pays the additional contributions, you'll receive benefits calculated on the unrestricted salary.

Where a member in the STPS 2015 has a Salary Link, meaning the salaries earned during service in the STPS 2015 are taken into account to determine the best final average salary, the restriction will apply when determining the best final average salary used to calculate benefits in the STSS. The restriction does not apply in respect of the accrual of pension in the STPS 2015.

It is not possible to anticipate whether this provision might apply in any individual's case (and, if so, what the impact might be) in advance of retirement. It is only at retirement that we will be in a position to determine your pensionable salary period and assess your salary progression against standard pay awards during that period. If you are approaching retirement and you think that it is possible that your pensionable salary might be affected you should speak to your employer.

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