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Commutation refers to the right that a beneficiary has to exchange one type of income for another. Commutation is offered to annuitants and to the beneficiaries of life insurance policies so that they might receive a lump-sum payment instead of a series of future payments.
For example, the substitution of a sentence of parole for the original sentence of incarceration. A jurisdiction that uses that definition of commutation would use another term, such as a remission, to describe a reduction of a penalty that does not change its character.
A commutation payment is a fixed or single lump-sum payment from your RRSP annuity that is equal to the current value of all or part of your future annuity payments. A commutation payment from your RRSP may be transferred directly to a RRIF, PRPP and SPP or to buy yourself an eligible annuity.
A commutation is a reduction of a sentence to a lesser period of time. The president can commute a sentence if he believes the punishment is too severe for the crime. While a pardon deletes a conviction, a commutation keeps the conviction but deletes or lowers the punishment.
In criminal law, commutation refers to reducing or lessening a sentence or punishment resulting from a criminal conviction , which can be done by the governor of a state (for state convictions) or president of the United States (for federal convictions).
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When the time has come to retire, you can choose to give up part of your annual entitlement to pension to receive a one-off lump sum payment in return. This is called commutation. However, there are limits on the amount that can be commuted.

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