Part 1: Public Service Pension Schemes Chapter 1: Schemes other than Judicial Schemes and Local Government Schemes Section 14: Pension benefits and lump sum benefits: pensioner and deceased members
This section sets out the treatment of overpaid and underpaid pension benefits and lump sum benefits where a pensioner member or a representative of a deceased member is entitled to pension benefits from a legacy scheme in relation to a period of remediable service. Corrections may be necessary owing to the different pension benefits and lump sum benefits that arise as a consequence of the operation of section 2(1) and the section 6 election process.
	Section 14(3) applies when a pensioner member or a representative of a deceased member makes an election to receive new scheme benefits, or if later, on the coming into force of section 2(1). If no election has been made to receive new scheme benefits, section 14(3) applies immediately before the end of the period during which a pensioner member or a representative of a deceased member could have made such an election (see definition of "the operative time" in section 14(7)). Under section 14(3), if the aggregate of pension benefits paid from a legacy scheme in respect of the remediable service exceeds the aggregate of pension benefits due from the legacy scheme (as a result of section 2(1) and 6(4) and (5)), then the beneficiary must pay the difference to the scheme. Section 14(4) states that where a member received less pension benefits than they are now entitled to under the legacy scheme, then the scheme manager will pay the difference.
	Section 14(5) and 14(6) make equivalent provision to 14(3) and (4) in relation to any lump sum benefits already paid in respect of a member’s remediable service and any that the member is entitled to under the legacy scheme.
	Where a pensioner member or the representative of a deceased member elects to receive new scheme benefits in relation to a period of remediable service (under section 6(1)) they may be entitled to higher or lower benefits as a result of their choice. Similarly, where a pensioner member or the representative of a deceased member decides not to make a section 6 election in relation to a period of remediable service they may be entitled to higher or lower benefits, where the remediable service includes a period that would have been pensionable under a Chapter 1 new scheme but for section 2(1). Section 14(3) to 14(6) provide for any overpayment or underpayment in benefits before the choice was made and came into effect to be corrected.
	The reason for treating lump sum benefits and pension benefits separately is that the payments are assessed differently for the purposes of determining whether tax is due on the payments. Pension lump sums paid to pensioner members and in relation to those who died before reaching age 75 are usually exempt from tax. The legacy pension schemes generally (but not universally) provide for an automatic lump sum to be paid, although sometimes with both an automatic lump sum and an option to convert some of the separate continuing pension to lump sum (known as "commutation"). However, the new schemes generally do not provide for any automatic lump sum, but allow a member to commute a proportion of their pension to receive a lump sum payment instead. Where a pensioner member or the representative of a deceased member becomes entitled to receive alternative benefits to those that have already been paid (i.e. makes an election to receive new scheme benefits rather than legacy scheme benefits in relation to a period of remediable service that was pensionable service under a Chapter 1 legacy scheme (under section 6), or does not make such an election and therefore becomes entitled to legacy scheme benefits rather than new scheme benefits in relation to remediable service that would, apart from section 2(1), have been pensionable service under a Chapter 1 new scheme) they will also need to make a decision about any lump sum payable, including whether to convert that to or from pension. Where they choose to receive a lower lump sum than that already paid, they will need to repay the difference to the scheme, but they will be able to instead choose to receive an equivalent or larger lump sum where the existing scheme provisions allow. The same choices will be available to members as would have been available to them had they been members of the relevant scheme during their remediable service.