Taking NRA 60 & AVCs

[RobertT]

It’s tax free. As well as lump sum that’s also tax free. I always intended to take avc as one lump sum.

As again when I got forecast off Zurich- it was just over 40 years. Before I would have been in pocket. If I’d have taken it yearly as an income. Well I cannot see the point of waiting beyond my 95th to see a profit.

As a section B member you get a lump sum as standard, but you can choose to give up some or all of that to get a bigger guaranteed and index linked pension if you want.

However, with your AVC’s you have a number of choices. The one you seem to be describing sounds like buying an annuity providing similar benefits to your RM pension i.e joint life and index linked. In which case at your age(55 going by my memory of your previous posts) will be very poor value for money. But you also have to factor in inflationary increases each year, which would bring the break even age down.

If you do want to go down the annuity route, you also have the option of shopping around for a better rate, buying a different type of annuity, or deferring until you're older in which case you're likely to get a larger income for your money.

[RobertT]

This is a very tricky subject and i spoke to the Pensions team today and asked the following question:

Can you tell me if I take my NRA 60 and my maximum lump sum how much of my overall AVC can I take.

Answer: I will have to forward to my supervisor and get back to you.

The thing is if you have 2 pension (NRA 60 & NRA 65) I wanted to know what % of the AVC goes with each pension. i.e. if I take the NRA 60 now how much of my AVC could I take. Is this done in % terms of the overall pension pot.

I wish I went to school more..................

When taking your NRA60 you can take as much of your AVC’s as you want, the important thing is what you do with any excess after you’ve taken the 25% of your overall pot.
So you can take that as either taxable cash, transfer it, or defer it to take at a later date(with your NRA65 would be the obvious time).

[RobertT]

hi heapsy,

You are 100% correct but how does this translate into working out your lump sum and the amount of AVC, if you only want to take your NRA 60 at this stage with the maximum lump sum and some AVC.

If I give some fictitious figures it might help.

Section C being taken at 55

NRA 60 £9200 no lump sum

NRA 65 £7170 plus £47,000

If you have £48,000 in your AVC

How would you work out how much of your AVC pot you could or would take out with your NRA 60 pension without paying any tax.

You seem to be saying you want to commute some of your NRA60 pension to get a lump sum and take some of you AVC’s at the same time. Why? The whole point of paying AVC’s especially for a section C member, is to fund the tax free lump sum, so you don’t have to commute any pension to get one!

Plus as you’re planning on taking your NRA60 at 55 you will have a triple hit on your pension income:
1. 25% reduction for taking it early.
2. 25% reduction for taking the lump sum out of your main scheme benefits.
3. If you’re still working, you’ll most probably be paying income tax on those pension payments.

Based on your figures, here is rough example of what you can do:

If your NRA60 pension at 60 was going to pay £9,200 per year then that makes a pot value of £184,000, but if you’re taking it at 55 then you have to take 25% off giving you £138,000. Then add on your AVC’s of £48,000 giving an updated value of £186,000.
Therefore you can take 25% of that as your tax free cash = £46,500. Basically all of your AVC’s tax free.

The remaining £1,500 could be taken as taxable cash, transferred into another pension arrangement for drawdown or annuity, or you can defer doing anything with it and leave it in your AVC and take it with your NRA65. If you’re still working for RM you can carry on paying into it aswell.

[Fatboyslim]

It’s tax free. As well as lump sum that’s also tax free. I always intended to take avc as one lump sum.

As again when I got forecast off Zurich- it was just over 40 years. Before I would have been in pocket. If I’d have taken it yearly as an income. Well I cannot see the point of waiting beyond my 95th to see a profit.

As a section B member you get a lump sum as standard, but you can choose to give up some or all of that to get a bigger guaranteed and index linked pension if you want.

However, with your AVC’s you have a number of choices. The one you seem to be describing sounds like buying an annuity providing similar benefits to your RM pension i.e joint life and index linked. In which case at your age(55 going by my memory of your previous posts) will be very poor value for money. But you also have to factor in inflationary increases each year, which would bring the break even age down.

If you do want to go down the annuity route, you also have the option of shopping around for a better rate, buying a different type of annuity, or deferring until you're older in which case you're likely to get a larger income for your money.

Oddly enough - I did not want the AVC. It was 'forced' upon me. I was a victim of the late 80's pension mis-selling fiasco. Long story, but I had to buy an AVC. Like it or not.

To start with. In the mid 90's the fund dropped by 75%. Only worth 25% what I'd invested. It got to the stage where I literally binned the annual statements as it used to wind me up too much. Only in the last decade has it made money. Breaking even after about 13-14 years. I always vowed to exit asap. Now? It is not a life changing sum but, it will enable us to change our car - and I fancy another classic motorbike to add to my collection. So, all in all it did turn out ok in the end.

[Hawkey99]

Hi Robert,

Thanks for your reply. I didn't explain it at all well.

What I wanted was some kind of example sum which is exactly what you have provided.

If I decide to take my pension now I would look to take my NRA 60 and my maximum lump sum from my AVC.

At an appropriate time I would then take my NRA65, DBCBS and AVC taking the maximum tax free lump sum possible with the remainder of the AVC being paid into a SIPP. I think thats the correct way ??

Thanks again......

[fly-catchers]

When I took my Bonusplan AVC as my tax free lump sum I got paid 90% of it on my 60th birthday. They said that roughly 6 weeks later they would disinvest it and pay the remainder. But I would also keep on paying into it and build up more funds for my NRA65 assuming I did not leave before them. Interestingly when I log on they still show all my amount as if I hadn't had any funds taken out of it! It has gone down by about £300 but thats because of the drop in the stock market. No word about the other 10% that I am currently due. Also my NRA60 and date on the Zurich website has now changed to NRA65 and my birthday date in 2023!