What is commutation?

Commutation is where part of the entitlement to a pension for life is exchanged for a lump sum payable on retirement. This requires a calculation of the current value of the entitlement given up. The calculation is done using actuarial advice. The advice is set out in tables containing “factors”. The level of the factors depends on age and life expectancy.

There are three main changes:

  • the factors are increased
  • the same factors are applied to men and women
  • the factors vary with months of age rather than age next birthday

 

The new factors apply immediately and are backdated to 1 December 2006.

 

You may have heard recently about the Government increasing the commutation 'multiplier' Please read the following two documents which gives a full explanation of the process.

PLEASE NOTE THE BELOW DOCUMENTS STILL REFER TO THE OLD INCEPTION DATE OF 1 OCTOBER 2007. THIS HAS SINCE BEEN REVIEWED AND THE CORRECT REFERENCE DATE IS 1 DECEMBER 2006.

 

JBB CIRCULAR NO : 44/2008 - CHANGE IN COMMUTATION AND EXCHANGE FACTORS

Government Actuary's Department - Commutation and Exchange of Lump Sum

These preceeding figures have now been replaced by the 2011 commuttion rates

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