Pension Options

[yorkmover123]

Received my pension options from Capita

NRA60 benefits-Option 2

Take reduced pension of £7,000 and maximum tax free lump sum of £46,680
This includes a temporary transfer in pension of £191.69 per annum and additional temporary pension supplement of £1512.15 per annum will become payable if you cease employment
The AVCs will remain deferred under this option

NR60 benefits-option 2A

Take reduced pension of £7,648 per annum tax free lump sum of £50,992 this includes your AVC if £18,336 together with £32,645 from your RM statutory pension scheme benefits
This includes a temporary transfer in pension of £191.69 per annum to and additional temporary pension supplement of £1512.15 per annum will become payable if you cease employment

Under option 2A I have £36,000 AVCs only showing £18,336 no breakdown of the AVC has this funded my annum pension

Looking at option 2 RM statutory pension scheme benefits I receive £46,680 lump sum but under Option 2A I receive less RM statutory pension scheme benefits of £32,645 don’t understand why it’s lower on this option

Thinking of deferring my AVCs fund until I leave the business in five years time when I am 65 , not sure what to do any guidance or advice much appreciated thank you

[RobertT]

Under option 2A I have £36,000 AVCs only showing £18,336 no breakdown of the AVC has this funded my annum pension

Looking at option 2 RM statutory pension scheme benefits I receive £46,680 lump sum but under Option 2A I receive less RM statutory pension scheme benefits of £32,645 don’t understand why it’s lower on this option

It's because you'll be using some of your AVC's to fund tax free cash. That in turn, means your pension will be bigger as you won't be giving up as much pension to fund the lump sum.

The excess AVC's could be taken as a taxable lump sum, deferred to NRA65 or transferred to a personal pension.

Thinking of deferring my AVCs fund until I leave the business in five years time when I am 65 , not sure what to do any guidance or advice much appreciated thank you

It's each to their own.

If you defer taking your AVC's until you take your NRA65, you will probably pay a lot of tax due to the DBCBS funding the tax free cash.

If you transfer your AVC's to a personal pension, then normal DC pension rules will apply when you subsequently access that money – the first 25% is tax free and the remainder classed as income.

My personal plan is to use my AVC's to fund all of the tax free cash, so I can maximise the NRA60 pension. In my case, I have AVC's of over 25% pot value and will transfer them sometime between taking my NRA60 and NRA65.

What's right for one person isn't always right for someone else.
Some people want the max pension, some want the max lump sum, some want a bit of both!

[yorkmover123]

Robert thank you for replying to my questions your a good person and very knowledgable on pensions and am sure we all appreciate your time and effort to help and understand your replies to all our questions of pensions

[Engy]

Hi, why isn't the whole of the AVC used to fund the lump sum to get a higher pension? I have enough in my Avc to cover whole of lump sum and wàs hoping to do this

[Engy]

Hi, why isn't the whole of the AVC used to fund the lump sum to get a higher pension? I have enough in my Avc to cover whole of lump sum and wàs hoping to do this

[RobertT]

Hi, why isn't the whole of the AVC used to fund the lump sum to get a higher pension? I have enough in my Avc to cover whole of lump sum and wàs hoping to do this

That is an option and it's what AVC's are designed to do. It's just that other options are available too.

Although your choices can vary slightly depending on which section you're in.
As A/B members get a lump sum as standard, some of which can be commuted for a bigger pension. While C members don't get a lump sum, but have the option to give up some pension to get one.

[freespeech]

Have the options changed? I thought they didn't include AVC's or cash balance until after you commit?

[Engy]

Thanks Robert, I'm a section B member joined 86 I'll have to have a look at my last forecasts but I think it was 9,500 and 30,000. I've 60 ish in AVC how would that work?

[RobertT]

Thanks Robert, I'm a section B member joined 86 I'll have to have a look at my last forecasts but I think it was 9,500 and 30,000. I've 60 ish in AVC how would that work?

Assuming you're just referring to your NRA60, section A/B members have a number of choices:

1. Take the standard lump sum and use some AVC's to make that up to 25%, then either take the excess as a UFPLS, defer it to NRA65 or transfer out to a personal pension for drawdown or annuity.
2. Commute some pension to get a bigger standard lump sum, then as above with all your AVC's.
3. Commute some or all of the standard lump sum to get a bigger pension, then use the AVC's to fund the tax free cash.
4. Take the standard benefits, then transfer out all AVC's to a personal pension for drawdown or annuity.

If your figures are just for your NRA60 benefits and you wanted to keep the pension as it is(£9.5k), the maximum tax free lump sum would be around £63,000.

Bear in mind you'll also have the DBCBS, the majority of which can be used to fund the tax free cash with NRA65.

*UFPLS – stands for Uncrystalised Funds Pension Lump Sum, which basically means the first 25% of that payment is also tax free, with the remainder being classed as income and taxed under normal PAYE rules.

[heapsy]

Robert, am I right in thinking that some of the DBCBS can be taken with the NRA60? If so, roughly what percentage? Thanks.

[RobertT]

Robert, am I right in thinking that some of the DBCBS can be taken with the NRA60? If so, roughly what percentage? Thanks.

The DBCBS is specifically attached to benefits accrued via the RMPP, which is those from 2012 to 2018. So it can be taken predominantly with NRA65 benefits.

The original plan was for it to be taken alongside RMSPS benefits aswell, in a similar way to AVC's(Flexiplan & Bonusplan), but the Cabinet Office refused permission for that!

However, the RMPP are also responsible for some inflationary increases on RMSPS benefits that continued to increase from 2012 onwards.
Therefore some DBCBS can be taken with NRA60 benefits too.

As time goes by those inflationary increases will compound and therefore the amount of DBCBS that can be taken with NRA60 should also increase.

From memory of a few posts on these forums over the last year or two, I would say the amount of DBCBS you can take with your NRA60 is currently in the region of 15%.
But to be honest, it's just a guestimate on my part and I wouldn't base any important decisions on it.