Options help?

[friely]

Ok I have received my illustration letter from Royal Mail pension plan and can someone help me
In my nra65 I have a cash balance option of

1 £1836 year + £6866 tax free
1A £1836 + £6866 tax free +£5376 cash balance £33026 left over benefits from cash balance

2 £1673 + £11155 tax free

3 £2064
3A £2064 +no tax free + £13763 cash balance £24639 left over benefits from cash balance

If I pick option 1 or 2 what happens to the left over cash in the other options
I will still be working after taking any of the above
Please help

[RobertT]

Any remaining Cash Balance will be paid out as a Uncrystalised Funds Pension Lump Sum, which basically means the first 25% of that will be tax free and the rest classed as income and taxed accordingly.

[Delbhoy]

Ok I have received my illustration letter from Royal Mail pension plan and can someone help me
In my nra65 I have a cash balance option of

1 £1836 year + £6866 tax free
1A £1836 + £6866 tax free +£5376 cash balance £33026 left over benefits from cash balance

2 £1673 + £11155 tax free

3 £2064
3A £2064 +no tax free + £13763 cash balance £24639 left over benefits from cash balance

If I pick option 1 or 2 what happens to the left over cash in the other options
I will still be working after taking any of the above
Please help

how long you been with Royal Mail

[Dorset Plodder]

I agree about all of options friely, AND the ''Pension Speak'' can be very confusing.

I've just sent in my NRA65 Options... 2 options on the one scheme and 4 on the other! I did get an IFA to look at the paperwork and was pleasantly surprised that he thought the options I selected were the best for ME.

Slightly annoying that RMSPS didn't send a basic statement of Benefits letter, as did RMPP, It would have made it easier to show an IFA instead of trawling through the original options paperwork. As it was a total waste of paper... ''Thank you for your completed forms...we'll write to you again the day after your Birthday''!

I presume if you're continuing to work on after your NRA65 pension, until the State Pension kicks in, it's just another SMALL ammount of pension building up in the New Scheme?

[SeanMc]

This is how i see your options working out taking into consideration UFPLS

OPTION 1
REGULAR INCOME 1836
TOTAL CASH WITH DBCBS AS UFPLS 39508

OPTION 1A
REGULAR INCOME 1836
TOTAL CASH WITH LEFTOVER CASH BALANCE AS UFPLS 40314

OPTION 2
REGULAR INCOME 1673
TOTAL CASH WITH DBCBS AS UFPLS 43797

OPTION 3
REGULAR INCOME 2064
TOTAL CASH WITH DBCBS AS UFPLS 32642

OPTION 3A
REGULAR INCOME 2064
TOTAL CASH WITH LEFTOVER CASH BALANCE AS UFPLS 34706

Hope this helps.

[friely]

Thanks all for replying I have 38 years service in and I’m still waiting for my capita letter but this confused me as it looks like I have to take the UFPLS no matter which option I take which will put me over the 40% tax for 25/26

[SeanMc]

Bottom line is you can't take your Cash Balance (DCBS) totally tax free.

[July 1981]

Hi Friely, I’ve recently taken my NRA 65 and took option 3a, this increased my yearly pension whilst reducing the cash balance and the amount of tax you could potentially pay at 40%, also remember 25% of the remaining cash balance (UFPLS) is tax free.

[SeanMc]

The UFPLS is included in the above figs.

[max49]

As a thought, you could consider taking out an AVC for the financial year, through your wages, this would reduce your assessable pay (for the tax man) and, depending on your earnings, could be a way of keeping you out of the higher tax bracket for this year. Then once you retire you could access the fund of which 25% would be tax free.

[fatcat1uk]

I currently pay into our Avc scheme ,to help reduce my earnings ,but have been doing this keeping within PSE.
Question can I pay a lot more into Avc ,thereby reducing my earnings for the year,I am aware I will fall out of PSE ,but this loss would be offset by the savings made by not paying 40% tax, I hope this makes sense?

[RobertT]

I currently pay into our Avc scheme ,to help reduce my earnings ,but have been doing this keeping within PSE.
Question can I pay a lot more into Avc ,thereby reducing my earnings for the year,I am aware I will fall out of PSE ,but this loss would be offset by the savings made by not paying 40% tax, I hope this makes sense?

Technically you can pay 100% of your wages into pensions, up to a max of £60k per year(inc employer contributions). But in practice you can only pay around 85% into your RM scheme/s, because you've also got to pay other deductions like NIC's, etc.

Another option to what you're suggesting, might be to keep within PSE for your RM pension/AVC contributions and therefore max out the tax breaks. But also pay into a SIPP, where you should be able to claim additional tax relief on any earnings above £50,270, via a self assessment tax return. If so, each £1 going in over that limit will only cost you 60p.
Plus you'll have much more choice with your investments.