Cash balance question

[Wullie10]

I recently rang Sheffield to ask a few questions about my pension. They said everything is OK and I'd receive MY AVC as a lump sum if that's what I wanted. I asked about the cash balance. Everything I've read , is at 60 you can receive a percentage of this as lump sum. I mentioned this to the person on the phone and he said the cash balance is part of the NRA65 and under no circumstances would I be able to touch it , ie a percentage as a lump sum. Now I'm all confused again.

[RobertT]

The RMPP is responsible for all pension benefits accrued from 2012 to 2018, plus the DBCBS. Aswell as RMSPS benefits that continued to increase after 2012, or in other words some inflationary increases on RMSPS benefits.

Why else would there be NRA60 payments made by the RMPP, when the NRA60 relates to before 1st April 2010?

Some DBCBS can be and is taken with NRA60 benefits, by some people.
The member guide to benefits on page 10, says this:

The objective of the Cash Balance section is to provide you with a cash sum at age 65 (and in some circumstances at age 60 too).

[Wullie10]

Exactly. It was a bizzare phone call after all I've read about the pensions.

[RobertT]

Capita get a bad press on here, but personally my experiences of the PSC in Sheffield haven't been particularly good over the years either.

The 'advisors' seem to have a distinct lack of knowledge about the finer points of the scheme and often provide conflicting answers to the same question.

I found emailing them gets a more informed answer, although it takes longer than a phone call.

[Gary55]

Can only suggest you call again and hopefully get someone more clued up

[tractorboy2]

I had part of my cash balance at 60 instead of a lump sum , this was offered to me during the options.

[freespeech]

Can only suggest you call again and hopefully get someone more clued up

I agree but how the hell can we make life impacting decisions on the basis of "hoping to get the right person answering the phone". It's a massive concern.

[freespeech]

I had part of my cash balance at 60 instead of a lump sum , this was offered to me during the options.

Can I just clarify...was this before or after you had commited to taking your pension? I didn't think the DBCBS fund or AVC's were included in NRA60 quotes until you had already commited?

[tractorboy2]

I had part of my cash balance at 60 instead of a lump sum , this was offered to me during the options.

Can I just clarify...was this before or after you had commited to taking your pension? I didn't think the DBCBS fund or AVC's were included in NRA60 quotes until you had already commited?

You are correct that DBCBS are not included in the quotes , but when I sent back my option , I was sent a further option of taking some of it.

[renrag40]

Does anybody know what months inflation figure the cash balance scheme increase is based on?
I've been assuming they are basing it on the CPI figure and that it is the previous September's number that they use but I haven't found any literature that actually states that.

[RobertT]

Does anybody know what months inflation figure the cash balance scheme increase is based on?
I've been assuming they are basing it on the CPI figure and that it is the previous September's number that they use but I haven't found any literature that actually states that.

I don't think I've seen any literature that states which month they use either, but the RMPP released this on 16th May on their website:

Benefits building up in the RMPP after 1 April 2018 are normally increased each year in accordance with a policy set by Royal Mail Group (RMG). This is based on market conditions from time to time, but the aim is to provide an above inflation increase. We’re pleased to advise that the benefits built up in the Cash Balance fund as at 31 March 2022 for current employees (or those who left since 1 April 2018) were increased on 1 April 2023 by 11.3%. This met RMG’s aim of providing an increase above inflation (based on the CPI measure of 10.1%).

The September 2022 CPI figure was 10.1%.

The same can be said for the 2022 increase:

Benefits building up in the RMPP after 1 April 2018 are normally increased each year in accordance with a policy set by Royal Mail Group (RMG). This is based on market conditions from time to time, but the aim is to provide an above inflation increase. We’re pleased to advise that the benefits built up in the Cash Balance fund as at 31 March 2021 for current employees (or those who left since 1 April 2018) were increased on 1 April 2022 by 4.6%. This met RMG’s aim of providing an increase above inflation (based on the CPI measure of 3.1%).

The September 2021 CPI figure was 3.1%

https://www.royalmailpensionplan.co.uk/news/

[renrag40]

Cheers Robert

[rkss]

The latest illustration sent quotes as one can take the cash balance as tax free as long as within max limits set by hmrc, how can this be calculated taking into account if one has taken nra60 butly yet to take Nra65?

[RobertT]

The latest illustration sent quotes as one can take the cash balance as tax free as long as within max limits set by hmrc, how can this be calculated taking into account if one has taken nra60 butly yet to take Nra65?

The Cash Balance is attached to your other RMPP Age65 benefits, so that's the pension you accrued from 2012 to 2018.
It's not attached to the first two years of Age65 pension(2010-2012), because that comes under the RMSPS.

If you're in section C, then use the usual 20x multiple to work out the value of your RMPP Age65 pension. Then if you assume that is 75% of your Age65 pot, the other 25% can be taken as tax free cash from the Cash Balance fund.

Anything remaining can be taken as an Uncrystalised Pension Funds Lump Sum, which means the first 25% of that is also tax free, with the rest being classed as income and coming under normal PAYE tax rules.

For example:

RMPP Age65 pension = £3,000 per year
Cash Balance = £25,000

The theoretical cash value of the pension is £60,000(20x3,000).
If that equals 75% of the total value, you can take the other 25% or £20,000, from the Cash Balance as tax free cash.

£1,250 of the remaining £5,000 will also be tax free and the other £3,750 will be taxed at 20%, assuming basic rate. Meaning you'll lose £750 in tax.

If you're in section B, then you'll have a lump sum as standard and so the amount of the Cash Balance you can take tax free, will be quite small.
But the maths used would be basically the same as above, you'll effectively have two lump sums to factor in.

Any AVC's will also have to be included.

I hope that makes sense and helps.

[Hyrrokkin]

The latest illustration sent quotes as one can take the cash balance as tax free as long as within max limits set by hmrc, how can this be calculated taking into account if one has taken nra60 butly yet to take Nra65?

The Cash Balance is attached to your other RMPP Age65 benefits, so that's the pension you accrued from 2012 to 2018.
It's not attached to the first two years of Age65 pension(2010-2012), because that comes under the RMSPS.

If you're in section C, then use the usual 20x multiple to work out the value of your RMPP Age65 pension. Then if you assume that is 75% of your Age65 pot, the other 25% can be taken as tax free cash from the Cash Balance fund.

Anything remaining can be taken as an Uncrystalised Pension Funds Lump Sum, which means the first 25% of that is also tax free, with the rest being classed as income and coming under normal PAYE tax rules.

For example:

RMPP Age65 pension = £3,000 per year
Cash Balance = £25,000

The theoretical cash value of the pension is £60,000(20x3,000).
If that equals 75% of the total value, you can take the other 25% or £20,000, from the Cash Balance as tax free cash.

£1,250 of the remaining £5,000 will also be tax free and the other £3,750 will be taxed at 20%, assuming basic rate. Meaning you'll lose £750 in tax.

If you're in section B, then you'll have a lump sum as standard and so the amount of the Cash Balance you can take tax free, will be quite small.
But the maths used would be basically the same as above, you'll effectively have two lump sums to factor in.

Any AVC's will also have to be included.

I hope that makes sense and helps.

As always great help from RobertT

One thing clear to me - the whole pension thing is convoluted rubbish

Our pensions are a complete mess as far as i am concerned