Resettlement can be a daunting time, and there will be important choices about lump sums that you must understand. Here we explain a little on resettlement commutation for you.
Question:
What is resettlement commutation and what does it mean for my pension?
Answer:
Resettlement commutation applies to AFPS 75 only. It provides the option to give up some of your ’75 scheme taxable pension income to create a tax-free lump sum (in addition to the AFPS 75 terminal grant). There is a maximum amount of commutation allowed but you can choose to give up less if you wish, which would leave a higher pension income. If you opt to take resettlement commutation, your ’75 scheme annual pension income would be reduced as a result until Age 55 (essentially to ‘repay’ the element you commuted). At Age 55 the repayment is complete and your full pension is restored to its original value.
Next week, we have something on Divorce for you, meanwhile you can read more in this series here.
