Cash balance

[Duran]

I have been told. You do not lose 5% each year you take cash balance early. I have applied for my NRA60, NRA65 and Cash Balance. Figures quoted are £46k Cash Balance which is about right going off 2022/23 summary.

[NWpostie]

Would it be cost effective to take your NRA60 one year and NRA65 (cash balance) the following tax year ?

Benefitting from 25% tax free from each schemes ?

[Duran]

if you are taking your NRA60 and still working chances are you will be pushing your 50k basic tax rate. So the year after if you take NRA65 and Cash Balance you will still be way over 50k paye income. After you have taken 25% tax free lump sum.
Only way around paying less tax. Use all your Cash balance as tax free lump sum and use your lump sums from NRA60 and NRA65 as pension salary. I'm sure there are other options. I just want to get it out before the s**t show begins.

[heapsy]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live of. For me, it's too big a hit. Also, in my cash, I have money from other sources.

The forms I received had a small NRA60 amount, a reduced NRA65 amount then a separate form with the cash balance amount, it didn’t make it clear if this cash balance could be taken now or left for another time, I assume you can take it now with no penalties apart from the obvious tax implications, I like to think I’m a reasonably intelligent person but Royal Mail pensions are Einstein territory

Sorry for the late reply. I'm not sure how old you are. If 65, then there wouldn't be a reduction on the Cash Balance scheme. There would be, if you take it at 60 or before 65.

[heapsy]

if you are taking your NRA60 and still working chances are you will be pushing your 50k basic tax rate. So the year after if you take NRA65 and Cash Balance you will still be way over 50k paye income. After you have taken 25% tax free lump sum.
Only way around paying less tax. Use all your Cash balance as tax free lump sum and use your lump sums from NRA60 and NRA65 as pension salary. I'm sure there are other options. I just want to get it out before the s**t show begins.

Yes, a very good point. Especially if people perform overtime, but even without, they are likely to hit the 40% tax band.

[Duran]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live of. For me, it's too big a hit. Also, in my cash, I have money from other sources.

The forms I received had a small NRA60 amount, a reduced NRA65 amount then a separate form with the cash balance amount, it didn’t make it clear if this cash balance could be taken now or left for another time, I assume you can take it now with no penalties apart from the obvious tax implications, I like to think I’m a reasonably intelligent person but Royal Mail pensions are Einstein territory

Sorry for the late reply. I'm not sure how old you are. If 65, then there wouldn't be a reduction on the Cash Balance scheme. There would be, if you take it at 60 or before 65.

I have to disagree with you Heapsy. Whether you take at 55 or 65 The cash balance is 19.6% of you pensionable pay that you and royal mail have paid into since 2018. There is no % reduction for taking early. You get what you have paid in plus any interest payments. Only NRA65 loses the 5% per year if taken early. Taxable obviously after your first 25%.

[RobertT]

The RMPP website does say the DBCBS will be reduced if taken early: https://www.royalmailpensionplan.co.uk/ ... ing-early/

Taking voluntary early retirement

After you’ve reached 55, your employer may allow you to choose early retirement.
If you do retire early, your benefits will be calculated based on what you have built up at the date of leaving. Your pension and lump sum (including your Cash Balance fund) will be reduced because they’re being paid early.

However, the experiences of people on this forum would suggest it isn't reduced.

[renrag40]

A year or 3 ago somebody rang either the PSC or RMPP and asked what the reduction rate was for taking the DBCBS early along side their nra65 pension and they got the answer back 1.6% reduction for each year you take the DBCBS before 65 and a 5% reduction for each year you take the nra65 pension.
I think a lot of people use the figure on the yearly pension statement...... but that is 6 months out of date if you are still an active member of the scheme by the time you receive it....... for example on last years statement my cash balance was £29,400 ...... by the time I received the pension statement there was over £32,000 in it ...... now there is over £38,000 in it. By the time I'm 60 at the end of September there will be over £40,000 in it.
So if I was to take it at age 60 and lose 8% the pot would be reduced to around £37,000 ..... which is roughly what the yearly pension statement would say I have in the pot when I receive it in October. I worked out that 2024 pension statement will say that as of April 2024 there will be £36,945 in my cash balance fund.
That's why I think people think there is no reduction for taking the DBCBS early.

[RobertT]

A year or 3 ago somebody rang either the PSC or RMPP and asked what the reduction rate was for taking the DBCBS early along side their nra65 pension and they got the answer back 1.6% reduction for each year you take the DBCBS before 65 and a 5% reduction for each year you take the nra65 pension.
I think a lot of people use the figure on the yearly pension statement...... but that is 6 months out of date if you are still an active member of the scheme by the time you receive it....... for example on last years statement my cash balance was £29,400 ...... by the time I received the pension statement there was over £32,000 in it ...... now there is over £38,000 in it. By the time I'm 60 at the end of September there will be over £40,000 in it.
So if I was to take it at age 60 and lose 8% the pot would be reduced to around £37,000 ..... which is roughly what the yearly pension statement would say I have in the pot when I receive it in October. I worked out that 2024 pension statement will say that as of April 2024 there will be £36,945 in my cash balance fund.
That's why I think people think there is no reduction for taking the DBCBS early.

Are you referring to Stephen500?

My recollection of that was that it was him that worked it out as 1.6%, but didn't actually factor in the annual bonus in any of his calculations, despite me telling him the what the percentages were.

There's logic in the pension being reduced by a certain percentage per year when taken early, because it's getting paid out for longer.

But is there any logic to the DBCBS being reduced in a similar way? Personally I don't think so.

I can understand a charge for dis-investing the money early, but as the DBCBS is a one off payment, what's the relevance in a yearly based reduction?

[renrag40]

Hi Rob
I don't think it was Stephen500 but it was around the time he was posting his step by step journey to getting his pension.
I agree that it shouldn't be reduced but it is classed as a Defined Benefit ....... or it could be that it makes it less of a financial burden on Royal Mail if the vast majority of people are basically handing back money by taking it early..... maybe thats why the fund is in surplus..... cynical old me!
I got the first lot of paperwork for taking my nra60 from both pensions last week.
Sent off the form on Monday.
This week I've got exactly the same paperwork from both of them again..... the only difference is the date on the paperwork...... Nice to see in a changing world some things remain the same.

[RobertT]

The definition of a Cash Balance pension scheme is a strange one!

Legally they're classed as a sub category of DC/money purchase.
But if the DBCBS is worth more than £30k and you want to transfer it, apparently you need the say so of an IFA, which normally applies to DB schemes.

Based on previous posts on here over the years, I don't think it is reduced. Or if it is, it's only by a minimal amount to cover costs, etc.

I've only had one reason to contact Capita/RMSPS and found them to be efficient. But the PSC/RMPP have made so many mistakes over the years, it's ridiculous!

[Hyrrokkin]

One thing reading this topic is again clear

Our pensions are a convoluted mess - we can do this or no we cannot do this or that we might be able to do this but not maybe

No wonder we get confused and lost trying to work it all out and make mistakes.