Benefit illustration

[RobertT]

The £5000 is what you have built up to the end of March 19, it is not a forecast. The cash balance fund can only be taken when you take your nra 60 or nra 65 benefits. It cannot be taken separately. Due to a recent ruling by the government the nra for the cash balance fund is 65 so if you took it early it would be reduced. The exact % I don’t know but would assume it would be the 5% per year as with your other nra 65 entitlements.
I interpret the workings out slight differently to RobertT in that the cash balance fund replaces part of your lump sum but does not increase the lump sum in any way. It has the effect of increasing your yearly pension in section B. The usually accept divider/multiplier for the pension pot is 20.
So for example, if your nra 65 pension is £3000 with a lump sum of £9000 retiring at nra. The total pension pot would be £69000 ((20 x 3000)+ 9000) of which you can take a maximum of 25% tax free which would be £17250 leaving £51750 pension pot to which is added the £5000 to give £56750.... this is then divided by 20 to give a yearly pension £2837.50.
The long and short of it being that the cash balance fund would give you an increase of £250 per year to £3250 if you didn’t take the maximum lump sum or mitigate the reduction in your yearly pension by £250 if you did take the maximum lump sum.
I would be interested to hear RobertT opinion on the above as this is just my ramblings on the subject and he has far more knowledge on the matter than me.

The way to work out the 'pot value' of your section B NRA65 pension is:

Pension x20 + standard lump sum + cash balance + AVC's(if applicable)

So if you have a pension of £3,000, standard lump sum of £9,000 and cash balance of £5,000, the pot value would be £74,000. Which in turn would provide a maximum tax free lump sum of £18,500 and a reduced pension of £2,775.

Page 12 of your plan guide will confirm.

But you also need to bear in mind that the cash balance is only 'attached' to pension accrued between 2012 and 2018.
So if it equals more than 25% of that part of your pension(which for section B will include some standard lump sum), then you can:

1. take some or all of your cash balance as taxable cash; or
2. reduce your standard lump sum to provide more pension

Although this is all fairly irrelevant to Hawkey99 as I think he's in section C, as are most other employee members of the RMPP.

[Hawkey99]

Thanks Robert,

Yes Im section C

How does the £5000 per year pension increase. Is it just the RPI rate each year but reduced by 5% if taken early.

Also I assume everything Im paying in now just goes towards the lump sum until the new scheme comes in.

[RobertT]

Your NRA65 benefits will increase by RPI each year, up to a maximum of 5%. But it will be reduced by 5% for each year you take it before 65.
The cash balance will also be reduced but the percentage isn't known, at least not by me. But 5% per year for that is probably a reasonable guess.

Your weekly contributions are currently going into the cash balance scheme. But, as it's only linked to your 2012-2018 pension, the longer that scheme is in place, the more likely we are to pay tax on some of it.

[celtic1967]

I got my deferred pension statement recently after IHR in September and I asked about taking my DBCBS amount as a lump sum and the RM pension helpline people wrote back saying that I could take the DBCBS as a tax free lump sum if I claimed when taking my NRA60 benefits on my 60th birthday. I was in section c

[RobertT]

There does seem to be some confusion about this!

The original idea was that the DBCBS would be linked to all our pension and could be taken along with either NRA60 or NRA65. But RM needed Cabinet Office approval for it to be linked to our pre 2012 RMSPS benefits. That's the part the government pays!

A few months ago we received a letter saying that approval had been refused and it could only be linked to our 2012-2018 benefits.

[celtic1967]

There does seem to be some confusion about this!

The original idea was that the DBCBS would be linked to all our pension and could be taken along with either NRA60 or NRA65. But RM needed Cabinet Office approval for it to be linked to our pre 2012 RMSPS benefits. That's the part the government pays!

A few months ago we received a letter saying that approval had been refused and it could only be linked to our 2012-2018 benefits.

Aye, thats how I understood so I was expecting them to confirm what I was thinking of a 25% reduction on the lump sum for taking it at 60. Bit concerning that the pensions experts are confused. Maybe they think its because I want to take my NRA65 (with reduction) at 60 as well.