RMDCP to DBCBS.

[ihatedogs]

Just looking at switching pensions & seeking opinions. Anyone switched into the defined benefit scheme? I've got 5 years to retirement so wondering if its worth the change.
Obvious benefit is the increased RM contribution & the " no loss" guarantee which protects the payments made in, whereas the RMDCP is open to your pension contributions rising/falling according to the investments chosen.
I'm going to look into this further & speak to the pension helpline, but thought I'd ask here to get peoples experience of this switch first.
What happens to my RMDCP funds if I switch?
I'd be wanting to make extra contributions, I'm currently paying 26% & want to continue that.
Finally, and probably not the best option tax wise, could I take all my current pension payments n full & start paying into the DBCBS.
Cheers.

[HWalden]

Be warned! The DBCBS is a holding scheme until the new shared risked DB scheme is set up. It's just a cash account and doesn't provide a tax free lump sum or monthly pension. That leaves you with three options to access your pot of money:-

1. Drawdown, if you drawdown more than 25%, there will be a tax charge on the excess
2. Buy an annuity
3. Transfer the balance to a SIPP (Self Invested Personal Pension)

Options 2 & 3 will incur management charges. It is unlikely you will build up contributions of more than £30K because the new shared risk pension will hopefully be set up this year. But, many of your colleagues have been paying into the DBCBS since it's inception in 2018 and have balances in excess of £30K and if they choose option 2 or 3 they will need to engage the services of an IFA (Independent Financial Advisor) which costs approximately £2.5 - £3K. I have raised this issue with the CWU and the RM Pension Trustees as it is impacting on an increasing number of postal workers. They don't exactly seem to be in a hurry to resolve the issue with RM.

[Jefferson Starfish]

Option 4 - the original aim - to fund a lump sum with nra65 pension. Some will be tax free.

You can only drawdown the dbcbs after you've transferred it to a personal pension.

[ihatedogs]

Thanks to you both for the quick, and informative, replies.
At this point I think I'll hang fire and see how the new pension shapes up when it's eventually introduced.
Cheers.

[July 1981]

This is an issue that will start to impact more and more people the longer we are in the RMDCP, with many section B members forced to transfer the pension out to avoid the potential of paying 40% tax if they continue working after taking the pension.

[ihatedogs]

This is an issue that will start to impact more and more people the longer we are in the RMDCP, with many section B members forced to transfer the pension out to avoid the potential of paying 40% tax if they continue working after taking the pension.

Can you expand on this mate? Can I not just access this directly from Scottish widows & do as I wish with it? Do I need extra steps to minimise my tax burden?
Cheers.

[linntroika]

I have opened a SIPP with HL (just paying the minimum amount per month into it) As i am also in section B , i plan to transfer all my AVCs and Cash balance into the SIPP once i hit 65.(another 6 years away) the growth in the cash balance and the AVCs in the past few years has been really good and Not transferring it yet plus another 6 years growth should more than pay for an IFA once i reach 65.
Several colleagues in work who have taken the cash balance with their 65 pension are getting hit for around 30%tax (if they have taken the 25% lump sum out of the NRA65)
I intend to drawdown once im 65 taking 10 years to empty the pot ( ie every £10k - £2.5 tax free and the rest taxable PAYE (should be 20%) This option to me would appear to be more tax efficient but a longer process

Happy to wait

[derekm]

I have opened a SIPP with HL (just paying the minimum amount per month into it) As i am also in section B , i plan to transfer all my AVCs and Cash balance into the SIPP once i hit 65.(another 6 years away) the growth in the cash balance and the AVCs in the past few years has been really good and Not transferring it yet plus another 6 years growth should more than pay for an IFA once i reach 65.
Several colleagues in work who have taken the cash balance with their 65 pension are getting hit for around 30%tax (if they have taken the 25% lump sum out of the NRA65)
I intend to drawdown once im 65 taking 10 years to empty the pot ( ie every £10k - £2.5 tax free and the rest taxable PAYE (should be 20%) This option to me would appear to be more tax efficient but a longer process

Happy to wait

The colleagues who took there cash balance with their 65 pension are they still working

[linntroika]

I have opened a SIPP with HL (just paying the minimum amount per month into it) As i am also in section B , i plan to transfer all my AVCs and Cash balance into the SIPP once i hit 65.(another 6 years away) the growth in the cash balance and the AVCs in the past few years has been really good and Not transferring it yet plus another 6 years growth should more than pay for an IFA once i reach 65.
Several colleagues in work who have taken the cash balance with their 65 pension are getting hit for around 30%tax (if they have taken the 25% lump sum out of the NRA65)
I intend to drawdown once im 65 taking 10 years to empty the pot ( ie every £10k - £2.5 tax free and the rest taxable PAYE (should be 20%) This option to me would appear to be more tax efficient but a longer process

Happy to wait

The colleagues who took there cash balance with their 65 pension are they still working

Yes they were all still working when they took it

[July 1981]

This is an issue that will start to impact more and more people the longer we are in the RMDCP, with many section B members forced to transfer the pension out to avoid the potential of paying 40% tax if they continue working after taking the pension.

Can you expand on this mate? Can I not just access this directly from Scottish widows & do as I wish with it? Do I need extra steps to minimise my tax burden?
Cheers.

From what I understand and I’ll give this as an example as this is what I intend to do in next couple of years.

When I take my NRA 65 I wish to carry on working, so will have both of my pensions plus my annual salary, for me this will be close to 40% Tax, I am aware that you can take 25% tax free and use against your lump sum, for me this would leave me with several thousand taxed at 40% and that’s why I intend to transfer out the RMDCP, I have kept an eye on the forum to see if anyone has experienced doing this, but haven’t read anything so far, I will be taking some proper advice before doing anything.

[Jefferson Starfish]

This is an issue that will start to impact more and more people the longer we are in the RMDCP, with many section B members forced to transfer the pension out to avoid the potential of paying 40% tax if they continue working after taking the pension.

Can you expand on this mate? Can I not just access this directly from Scottish widows & do as I wish with it? Do I need extra steps to minimise my tax burden?
Cheers.

From what I understand and I’ll give this as an example as this is what I intend to do in next couple of years.

When I take my NRA 65 I wish to carry on working, so will have both of my pensions plus my annual salary, for me this will be close to 40% Tax, I am aware that you can take 25% tax free and use against your lump sum, for me this would leave me with several thousand taxed at 40% and that’s why I intend to transfer out the RMDCP, I have kept an eye on the forum to see if anyone has experienced doing this, but haven’t read anything so far, I will be taking some proper advice before doing anything.

It sounds like you want to transfer the DBCBS, I doubt you're even in the RMDCP.

[July 1981]

This is an issue that will start to impact more and more people the longer we are in the RMDCP, with many section B members forced to transfer the pension out to avoid the potential of paying 40% tax if they continue working after taking the pension.

Can you expand on this mate? Can I not just access this directly from Scottish widows & do as I wish with it? Do I need extra steps to minimise my tax burden?
Cheers.

From what I understand and I’ll give this as an example as this is what I intend to do in next couple of years.

When I take my NRA 65 I wish to carry on working, so will have both of my pensions plus my annual salary, for me this will be close to 40% Tax, I am aware that you can take 25% tax free and use against your lump sum, for me this would leave me with several thousand taxed at 40% and that’s why I intend to transfer out the RMDCP, I have kept an eye on the forum to see if anyone has experienced doing this, but haven’t read anything so far, I will be taking some proper advice before doing anything.

It sounds like you want to transfer the DBCBS, I doubt you're even in the RMDCP.

My bad, having so many different pensions is confusing