Commutation?

C

crugers

Guest
I'm trying to work backwards to prove figures given for options @ early retirement.

Available Pension:€39.6k p.a.
or
Commutation Lump Sum€127.6k, +
Reduced Pension::€32.8k p.a.

Each €1 commuted = €18.844 TFLS

Pensionable Salary: €88,920.33

DoE: 01/05/1972
DoR: 30/04/2004

I'm told Commutation Lump Sum is calculated thus:
Years of Service
Oct 1977 - DoE = 5.42yr
Oct 1977 to DoR =26.58yr

(a) (5.42/15) X (20/75) X 25% X €88.9k(Pensionable Salary) X 18.844 = €40.3k

(b) 26.58yr X (3/80) X €88.9k = €88.5k

(a) + (b) should= Commutation Lump Sum of €127.6

My questions are:
What is significance of Oct 1977?
Why multiplier in (a) of 20/75?
Why multiply this by 25%?
Why multiplier in (b) of 3/80?

Sum doesn't add up, so I'm going back to understand where problem is.
Any insight would be appreciated.
 
Commutation

The reduction of a sentence, as from death to life imprisonment.

The giving up of part or the entire pension that would be paid at retirement in exchange for a lump sum.
Applied to any exchange of a series of payments to which someone is entitled for a lump sum.
In the case of approved pension arrangements the amount that is commutable is strictly limited.
Click to expand...

Sorry I cant help with the calculations but the definitions above might help the thread.

ajapale
 
Re: Commutation

Time off for good behavoir more like!
So maybe:
The reduction of a sentence, as from life imprisonment to parole,
would be more apt?
Thanks ajapale for the input.
 
Commutation

I would imagine that the rules of the pension Scheme detail what should be provided as a lump sum benefit.

3/80 would be a common figure used in calculations. Previous figures would date back to changes in scheme accrual from October 1977, but the 25% looks like an attempt to mimic the 25% tax-free lump sum payable on personal pensions.

So really it would be necessary to look at the specific scheme rules.

One observation is that conversion terms look very generous!
 
Commutation

Hi Azriel
Thanks for that. Yes it is the specific scheme rules.
Got the clarification I needed from the pension department after 3 attempts...
Much obliged for the assistance.
 
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