Help with NRA 60 option 2

[PostBoxer]

Can someone work something out for me before I return my option forms?

I need to know what the new figures will be after I opt for a reduced lump sum and higher pension.

NRA 60 option 2
£38,619 lump sum
£5,792 pension

If I reduced the lump sum to £30k how much will the £5792 pension increase to

[RobertT]

To work that out we need to know the commutation factor, which is how much lump sum you give up to get each extra £1 of pension.

Have you been given that factor?
Are there other figures on your option forms you can work it out from?
Can you ask the pensions people?

For a section C member(who don't get a lump sum as standard) wanting to give up some pension for a lump sum, I believe it's roughly 1:20. Which means for each £1 of pension they give up, they get £20 in lump sum.

But it sounds like you're in section B, and I don't think the commutation rate is as generous when making the opposite choice of lump sum to pension.
I seem to remember years ago seeing a figure of either 1:24 or 1:28, although I could be wrong.

But if you take an average of 1:26, that would mean for each £26 of lump sum you give up, you'll be gaining £1 in pension.

If my maths is correct, in your case you would gain about £330 in extra index linked pension per year in exchange for your £8,620.

But without knowing the actual commutation factor, that is just a guestimate on my part.

[PostBoxer]

Thank you for that reply, ,
I not sure what the commutation number is.
I joined in 1989, I’m taking my pension at 55.
I was hoping that giving up over 8k of the lump sum would boost the pension by quite a bit, I guess I’m wrong.

On the form there is a box under the quote which says put here the reduced amount of PCLS,
IF i put 30k then send off the form they will then recalculate,
If I do that does that mean I have to take that new quote? Or can I reject it and stick with the original quote?

[RobertT]

If you joined in 1989, you'll be in section C!

So have you already told them you want the maximum lump sum, hence the figure you quoted in your first post?

If so and based on the aprox section C commutation rate(1:20), your full pension and no lump sum would be roughly £1,930 more at £7,722.
Therefore for a £30,000 lump sum, your pension would be roughly £6,223.

I've haven't got any personal experience of getting a pension quote, but I don't think there's any commitment until you send your paperwork back saying you want to continue to take your pension.

If in doubt, give the pensions people a call.

[PostBoxer]

I’m definitely going to give them a call tomorrow.
Thank you for replies

[freespeech]

If you joined in 1989, you'll be in section C!

So have you already told them you want the maximum lump sum, hence the figure you quoted in your first post?

If so and based on the aprox section C commutation rate(1:20), your full pension and no lump sum would be roughly £1,930 more at £7,722.
Therefore for a £30,000 lump sum, your pension would be roughly £6,223.

I've haven't got any personal experience of getting a pension quote, but I don't think there's any commitment until you send your paperwork back saying you want to continue to take your pension.

If in doubt, give the pensions people a call.

Robert, wouldn't some of his cash balance sum be used to fund the LS therefore preserving some of his monthly pension?

[RobertT]

Robert, wouldn't some of his cash balance sum be used to fund the LS therefore preserving some of his monthly pension?

That is an option!
But the DBCBS and any AVC's aren't included in the quotes until the member says they want to continue. It doesn't sound to me as if that's the case.

[PostBoxer]

I phoned them this morning,
If I wanted to reduce my lump sum from £38k down to £30k it would add a measly £500 per year to my pension.
I’m definitely not opting for that.

[RobertT]

A little bit higher than my guestimate, but not a lot.

[PostBoxer]

Yes Robert not a bad guesstimate .
Also if I had put 30k in the box and sent the forms off the lady on the phone said there would then be no going back.

[freespeech]

Yes Robert not a bad guesstimate .
Also if I had put 30k in the box and sent the forms off the lady on the phone said there would then be no going back.

.....although if you were to commit to it any AVC's and the NRA60 bit of the DBCBS can be used to fund some of the LS so your pension will be higher with the same LS.

[PostBoxer]

Thanks for that info but I’ve sent my forms off now

[tractorboy2]

If you joined in 1989, you'll be in section C!

So have you already told them you want the maximum lump sum, hence the figure you quoted in your first post?

If so and based on the aprox section C commutation rate(1:20), your full pension and no lump sum would be roughly £1,930 more at £7,722.
Therefore for a £30,000 lump sum, your pension would be roughly £6,223.

I've haven't got any personal experience of getting a pension quote, but I don't think there's any commitment until you send your paperwork back saying you want to continue to take your pension.

If in doubt, give the pensions people a call.

Robert, wouldn't some of his cash balance sum be used to fund the LS therefore preserving some of his monthly pension?

The DBCBS can be used to fund the lump sum from the RMPP Age 60 benefits and not the RMSPS.

[Duran]

They shouldn't be sending out quotes without including the cash balance fund. This is a large pot of money for some of us. Many won't know you can use some of this pot. Using it as tax free lump sum cash. So you can keep more lump sum money from your NRA60 for your yearly pension salary.

Should be available to see as an extra option. They are dismissing over 4 years, and in some cases over 30k of our pension funds. Until after you decide what option you want to take.

[RobertT]

They shouldn't be sending out quotes without including the cash balance fund. This is a large pot of money for some of us. Many won't know you can use some of this pot. Using it as tax free lump sum cash. So you can keep more lump sum money from your NRA60 for your yearly pension salary.

Should be available to see as an extra option. They are dismissing over 4 years, and in some cases over 30k of our pension funds. Until after you decide what option you want to take.

I've never understood why the Cash Balance(DBCBS) and AVC's aren't included in the initial quotes. As you say, it can amount to a large sum of money and could potentially affect the option you choose!

The original idea of the DBCBS was to fund the tax free cash when taking all of your pension benefits – the NRA60 and NRA65.

But RM needed the approval of the Cabinet Office for it to be used for the lump sum associated with RMSPS(upto 2012) benefits. That was refused!

So the DBCBS can only be used to fund the tax free cash for benefits accrued via the RMPP(2012-2018). Meaning the majority can only be taken with NRA65 benefits.

Although some can be taken with the NRA60, as the RMPP are responsible for some inflationary increases to RMSPS benefits.