At a glance
There are some limits that cap the amount of pension you can build up each year and the amount of tax free cash you can receive from all your pensions.
Your yearly build up
Annual allowance
The annual allowance limits how much your pension (from all pension schemes) can grow each year before tax charges might apply. This is known as your pension input amount. More information can be found in the 2015, how your pension builds up section of the website.
When you take your pension
Lump sum allowance
The lump sum allowance limits the amount of tax free cash you can receive from all your pension arrangements when you retire.
For the 2026/27 tax year this is £268,275. Find out more in the government website.
In the police pension scheme, the tax free cash payment is known as a pension commencement lump sum.
There is a limit set by the 2015 police pension scheme which means that the pension commencement lump sum cannot exceed the ‘permitted maximum’ which is either:
- The lump sum allowance, or
- 25% of the overall value of your benefits coming into payment (known as their capital value)
If you have a pension commencement lump sum that is greater than either of these, then the excess part is known as an unauthorised payment. This is only possible in the 1987 scheme. Find out more in the 1987 section.
Calculating capital value
To calculate the value of your police pension scheme benefits, known as the capital value, you use the following formula:
For this calculation, your annual pension is your pension after any changes for early or late retirement. It is the value of your pension after you have selected to exchange any for a lump sum (known as commutation, if applicable).
If you die
Lump sum death benefit allowance
There is a limit on the amount your beneficiaries can receive if you were to die. Find out more in the 2015, death benefits section.