PCLS – Defined Benefit

The objective of the PCLS Defined Benefit calculator is to provide the client with an indication of their maximum expected Pension Commencement Lump Sum (PCLS) entitlement at retirement from their Defined Benefit scheme.

The level of Defined Benefit pension that the client will receive when they retire is based on their length of service and salary (& increases in deferment if they have already left service).

The calculator will also take into account, those Defined Benefits schemes which also pay a tax-free lump sum, of 3x Pension, in addition to the pension.

At retirement, the Defined Benefit scheme will provide the client with the option of taking a Pension Commencement Lump Sum (PCLS) and a reduced level of pension. Similar to the pension, the amount of PCLS will normally depend on the clients’ length of service and salary.

The amount of reduction will depend on the Commutation Factor. This determines the amount of PCLS payable as a result of the amount of pension that’s commuted. So for example if the Commutation Factor is 12, then for every £1 of pension commuted, the amount of PCLS payable is £12.

However, a higher amount of PCLS can be available, rather than the amount depending on service and salary. The maximum PCLS available is 25% of the client’s capital value of his pension fund. the capital value is the PCLS payable plus 20 x reduced pension.

Once details of the DB pension and Commutation Factor are input, it will show the maximum PCLS and corresponding amount of reduced pension.