Do i need to take a Lump Sum?

[Stef]

I am 48 years old and i am at the age where i am starting to think of my pension. Personally i would like as big a weekly pension as possible, i don't fancy my pension being redused by taking a large lump sum.Do i need to take a lump sum? Can i have a maximum pension without any Lump sum?

[RobertT]

I am 48 years old and i am at the age where i am starting to think of my pension. Personally i would like as big a weekly pension as possible, i don't fancy my pension being redused by taking a large lump sum.Do i need to take a lump sum? Can i have a maximum pension without any Lump sum?

I’m assuming you’re in either section B or C of the RMPP?

Section B provides a lump sum as standard, but you are allowed to commute some or all of it to provide a bigger pension.
Section C is the opposite, so it doesn’t provide a lump sum as standard but you can commute some of your pension to get one.

The figures quoted on your annual statement are usually for the maximum lump sum you could take. But you can take a smaller amount, or choose to take no lump sum at all.

Another option might be to pay AVC’s and use them to fund your lump sum and still take the maximum pension.

[Stef]

I am 48 years old and i am at the age where i am starting to think of my pension. Personally i would like as big a weekly pension as possible, i don't fancy my pension being redused by taking a large lump sum.Do i need to take a lump sum? Can i have a maximum pension without any Lump sum?

I’m assuming you’re in either section B or C of the RMPP?

Section B provides a lump sum as standard, but you are allowed to commute some or all of it to provide a bigger pension.
Section C is the opposite, so it doesn’t provide a lump sum as standard but you can commute some of your pension to get one.

The figures quoted on your annual statement are usually for the maximum lump sum you could take. But you can take a smaller amount, or choose to take no lump sum at all.

Another option might be to pay AVC’s and use them to fund your lump sum and still take the maximum pension.

Thanks RobertT, I am in Section C. Nice to know that a lump sum is not standard and i can choose to take no lump sum at all. Ye i will defo consider the AVC's option, thanks for your help

[heapsy]

I am 48 years old and i am at the age where i am starting to think of my pension. Personally i would like as big a weekly pension as possible, i don't fancy my pension being redused by taking a large lump sum.Do i need to take a lump sum? Can i have a maximum pension without any Lump sum?

I’m assuming you’re in either section B or C of the RMPP?

Section B provides a lump sum as standard, but you are allowed to commute some or all of it to provide a bigger pension.
Section C is the opposite, so it doesn’t provide a lump sum as standard but you can commute some of your pension to get one.

The figures quoted on your annual statement are usually for the maximum lump sum you could take. But you can take a smaller amount, or choose to take no lump sum at all.

Another option might be to pay AVC’s and use them to fund your lump sum and still take the maximum pension.

Thanks RobertT, I am in Section C. Nice to know that a lump sum is not standard and i can choose to take no lump sum at all. Ye i will defo consider the AVC's option, thanks for your help

Long and slightly boring post... please still read.

I am also 48 years old and a section C member. I am saving and investing away from work, Cash and Stocks and Shares ISAs. (You cannot take more than 25% of your pension/pensions, if you have more than one, as a lump sum) also paying AVCs which can be taken at 60. I intend to gamble a little and leave my NRA 65 pension until 65. The reason being is that I don't want to lose any. (will lose 5% for every year I take it early. 25% if I take it at 60) I remember a few of the older guys from our office, (section A/B) left at 60 and then took part time jobs. This enabled them to draw their pension. You have to remember the longevity issue here. People did not envisage living until 80+ although quite a few of my old work mates have. In those days you could not draw your pension and still work if the pension was from the same company you were working at. If I am still willing and able I will take a part time job somewhere and draw the NRA 60 pension. If you pay AVCs you will get a bigger pension pot. You will still only be able to draw 25% lump sum but it will be a bigger lump sum. The reason for this work around is simple. 1 money cannot buy you time. Working less hours will give me a better work life balance. Early starts in delivery and working all day Saturday thanks to our glorious union are no good when you are older. 2 Beware the supplement trap. Read your pension statement carefully. You are entitled to a supplement from RM as part of your pension. This is payable when you take your NRA 60 pension and is paid UNTIL you reach STATE PENSION age. About 67 for us. If you take your NRA 60 pension and carry on working you DO NOT get the supplement until you leave. You will get it if say for example you left at say 62 ( you might want to retire at the same age as you wife/partner etc) but only from the time you leave. One thing would be to take the lump sum and spend it as if it were your pension. That is a certain amount each month. You would avoid some tax and still have the same money. Also, if like me you left the NRA 65 pension where it is, (I will be getting some inheritance from my parents but don't know how much or when) you would get an increase in income and another lump sum when your money may have dwindled a bit. Remember though that the lump sum needs to last a while. No point spending it and having just your pension after only a few years. Statistics show that the average pensioner runs out of cash after only seven years.

One final point, if anybody was a section C member of the pension scheme and left the business and then later rejoined, you do not get the supplement you built up before you left.

Sorry if it was long winded but I keep reading the same questions over and over because people do not read their pension statements and those that do often cannot understand them.

[stroller]

Heapsy,

Just a couple of questions if you don't mind, I am 54 now if I take VR before my 55th birthday and call in my pension at 55 after I have left Royal Mail will I still get the pension supplement? Or will I only get the pension supplement if I take EVR when I get to 55?

[RobertT]

I’m a similar age too and am using AVC’s, ISA’s and a personal pension to fund my retirement on top of the RMPP(section C).
While I agree with most of what heapsy says, I think the first couple of sentences concerning taking lump sums needs to be clarified.

If you’re paying AVC’s(Bonusplan & Flexiplan), they can be added to the value of your main RMPP benefits, and a maximum 25% tax free lump sum of the total value can be taken. Equally under the ‘new pension rules’ that were introduced in April 2015, defined contribution pension arrangements including Bonusplan & Flexiplan, can be taken from age 55 without having to take the main RMPP benefits(although it’s not necessarily a good idea). The first 25% of which would be tax free. While the remainder could either be taken in one go or ‘drawn down’ over a period of time, but would be classed as income and so would potentially be taxed. More info can be found here: http://www.royalmailchat.co.uk/communit ... 27&t=69013" onclick="window.open(this.href);return false;

One of the most important things about pensions and retirement planning, is to be realistic about when you want to retire and how much you will need. And the younger you start planning and saving, the better off you’ll be. People tend to not bother too much until perhaps their mid 40’s at the earliest and then they tend to make poor decisions in their desire to retire.

A pension is there to replace your wages when you give up work, or at least enable you to slow down a bit and just work part time. And they give you valuable benefits like tax relief, employer contributions and in the case of RMPP, an index linked income for life. At the same time, other investments like ISA’s can help towards your planning too. Because although they don’t attract the benefits I mentioned, they are far more flexible and can be taken at anytime. So they could fund a year or two of retirement before your pension kicks in, for example.

It’s also important to take the state pension into account as that will form a big part of your income into your 70’s and beyond. The amount you get will vary from person to person depending on their work/NI history. So don’t assume you will get the ‘headline’ amount or the same as your mate gets.

From a personal point of view, I took an interest in my pension over 20 years ago and decided then that 60 was the limit in terms of my working life. I realised at the time that the RMPP on its own probably wouldn’t be enough, and I started saving. I have now amassed quite a large sum of money in various different places and am on track to retire at (hopefully) 55. But I have no intention of touching any of my RM pension, until the correct ages. So NRA60 & AVC’s at 60 and NRA65 at 65.

With the changes to the RMPP over the years, if I hadn’t saved anything, then realistically I wouldn’t be able to retire completely until 65.

[RobertT]

Heapsy,

Just a couple of questions if you don't mind

Sorry for answering somebody elses questions.

I am 54 now if I take VR before my 55th birthday and call in my pension at 55 after I have left Royal Mail will I still get the pension supplement?

Yes but it would be reduced for early payment just like the rest of your pension.

Or will I only get the pension supplement if I take EVR when I get to 55?

If you are offered EVR then a supplement will be included in your pension.

But under the terms of the new MTSF agreement, if I understand it correctly, the maximum cost to the business of EVR must not exceed two years pay. So EVR will only be offered if that’s cheaper than VR.

[heapsy]

Heapsy,

Just a couple of questions if you don't mind

Sorry for answering somebody elses questions.

I am 54 now if I take VR before my 55th birthday and call in my pension at 55 after I have left Royal Mail will I still get the pension supplement?

Yes but it would be reduced for early payment just like the rest of your pension.

Or will I only get the pension supplement if I take EVR when I get to 55?

If you are offered EVR then a supplement will be included in your pension.

But under the terms of the new MTSF agreement, if I understand it correctly, the maximum cost to the business of EVR must not exceed two years pay. So EVR will only be offered if that’s cheaper than VR.

Correct

[stroller]

Cheers for the replies, just wondered as I was waiting hopefully to take my enhanced pension etc etc if offered EVR at 55, but seeing as the enhanced pension is gone now under the new MTSF agreement, I might take it if offered again before I get to 55 as I won't be much worse off, I presume.

[mudmonster]

Hello,I need a bit of advice about the lump sum,I have been told by RM pensions that my lump sum is tax free if I take it within 12 months of my due date at 55,reading on here it is saying that 25% can be taken of the lump sum and the rest taxed can anybody shed any light on who is correct ?

Thanks
Mud

[RobertT]

Hello,I need a bit of advice about the lump sum,I have been told by RM pensions that my lump sum is tax free if I take it within 12 months of my due date at 55,reading on here it is saying that 25% can be taken of the lump sum and the rest taxed can anybody shed any light on who is correct ?

Thanks
Mud

I think you are getting a bit confused between the main RMPP scheme and AVC’s.

If you take a lump sum from your RMPP it is tax free, but the monthly income will potentially be taxed depending on your overall income.

If you have Flexiplan or Bonusplan AVC’s with RM you can:

a) Add the value of them to the value of your main RMPP benefits and take a maximum of 25% of the total as a tax free lump sum. But only at the same time as taking your main benefits.

or

b) Take your AVC pot as a separate thing in which case the first 25% would be tax free and the rest can either be taken as an annuity, drawn down or all as cash in one go. But will be treated as income and potentially taxed, depending on your overall income.

[mudmonster]

Thanks Robert T ,things are starting to clear,I take it that the annual pension will be payable till I "snuff it" and then half of it will go to my wife is this right and income tax will only be payable if I reach the personal allowance threshold ?

Thanks
Mud

[Brainache]

Robert T,

b) Take your AVC pot as a separate thing in which case the first 25% would be tax free and the rest can either be taken as an annuity, drawn down or all as cash in one go. But will be treated as income and potentially taxed, depending on your overall income.

Does Zurich allow us to do this yet in any way ? ie take x amount out each year. Thanks.

[RobertT]

Thanks Robert T ,things are starting to clear,I take it that the annual pension will be payable till I "snuff it"

Yes.

and then half of it will go to my wife is this right

Yes there will be a spouses pension. Without looking I’m not 100% sure it’s half, but you should be able to find out by looking at the plan guides on the pensions website.

and income tax will only be payable if I reach the personal allowance threshold ?

You might find you will pay income tax initially, especially if you leave mid way through a tax year. But if your total income is less the personal tax allowance, then you shouldn’t pay tax. Or any tax paid that you’ve overpaid can be claimed back.

[RobertT]

Robert T,

b) Take your AVC pot as a separate thing in which case the first 25% would be tax free and the rest can either be taken as an annuity, drawn down or all as cash in one go. But will be treated as income and potentially taxed, depending on your overall income.

Does Zurich allow us to do this yet in any way ? ie take x amount out each year. Thanks.

To be honest I’m not sure but I don’t think so. But you should be able to transfer out to somewhere that does. But you will only be able to access it if you’re 55 or over.