Potential Tax free Lump Sum

[Hawkey99]

Just want to make sure Im doing my sums properly.

Take your NRA 60 pension amount and x 20 (assuming taking no lump sum)

Take NRA 65 pension amount and x 20 (assuming taking no lump sum)

Take total amount of cash in new pension scheme.

Take total amount of funds in AVC

Add all 4 together and you get 25% of the total amount.


Is that correct.

Thanks

[heapsy]

All depends on the actual figures. I'm paying into AVCs. I've calculated that I could have around £44,000, tax free, with the NRA60 pension. The Cash Balance scheme would be on top of this, but I haven't included the NRA65 pension, OR any subsequent pension scheme RM bring in. Assuming they actually do manage to do so, although I am beginning to have serious doubts.

[RobertT]

Just want to make sure Im doing my sums properly.

Take your NRA 60 pension amount and x 20 (assuming taking no lump sum)

Take NRA 65 pension amount and x 20 (assuming taking no lump sum)

Take total amount of cash in new pension scheme.

Take total amount of funds in AVC

Add all 4 together and you get 25% of the total amount.

Is that correct.

Thanks

By 'new pension scheme' I assume you mean the DBCBS?

If so, that sounds about right.
Also bear in mind if you've got any excess AVC' money after you've taken your 25% lump sum at the time of taking your NRA60, you can defer it to take with your NRA65. Therefore possibly avoiding any tax liability, depending on the amounts involved.

Whether we can then use anything left over from our AVC's/DBCBS, if there is any, to improve the lump sum from the CDC/DBLSS, is another thing altogether.

[Hawkey99]

So you take 25% tax free lump sum from your NRA60 and AVCs.

Then a few years later or whenever you wish you can come back and take a further 25% tax free amount out of your NRA65, new pension and any remaining AVCs combined together.

Thanks

[Hawkey99]

My logic being you could take a large tax free amount when you take the NRA 60 and AVC combined and then throw a lot more in your AVC in a few years to boost up your next 25% tax free lump sum.

Or can you not pay anymore into your AVC after you take the NRA 60 and initial AVC tax free lump sum?

Thats my thought anyway....

Thanks

[RobertT]

Lets say your NRA60 is worth £5k per year and so a total of £100k, plus AVC's & the DBCBS totalling £60k.

At age 60 you have a pot of £160k giving you a maximum tax free lump sum of £40k(25%).

The remaining £20k could be taken as taxable cash, used to buy an annuity or deferred to take with your NRA65. After consultation with the PSC, there is no option to transfer to drawdown!

If your NRA65 is worth £3k per year that gives a total value of £60k, plus your deferred AVC/DBCBS of £20k.

At age 65 you have a pot of £80k, giving a maximum lump sum of £20k. And you have taken all your AVC's & DBCBS as tax free cash. Anything over the 25% limit will be treated as above.

You can continue to pay AVC's as long as you're an employee of RM and the scheme rules allow it. We don't know if the current AVC's will continue when/if the CDC scheme is introduced.

In practice your NRA60 &NRA65 benefits should slowly increase over time with inflation(section C) and your AVC's will vary with investment performance and how much you put in them. So it's a good idea to regularly keep track of your valuations to make sure you don't go over that 25% limit.

[Hawkey99]

Thanks Robert,

So basically I could do as I suggested.

I mentioned it to someone else and they said once you have take anything from your AVC you have to use all of it. He said something about not using the same put twice and that you wold have to uncrystalize the whole pot (NRA60 & Total AVC) but that you could start a new AVC to pay into.

Does any of that make sense ??

[RobertT]

Thanks Robert,

So basically I could do as I suggested.

I mentioned it to someone else and they said once you have take anything from your AVC you have to use all of it. He said something about not using the same put twice and that you wold have to uncrystalize the whole pot (NRA60 & Total AVC) but that you could start a new AVC to pay into.

Does any of that make sense ??

On reflection is does make more sense!

What he is referring to would mean for example, that you could take your NRA60 and all of your Flexiplan, using that to fund your tax free lump sum, with anything left over being used as a taxable lump sum or to buy an annuity.

You could then open another Flexiplan account to fund some or all of your NRA65 lump sum.

Alternatively you could then use your Bonusplan and your DBCBS to fund your NRA65 lump sum.

A lot will depend on the amounts of money involved, but you can treat Flexiplan, Bonusplan and the DBCBS as three separate pots to be taken when the time is right.
* The DBCBS would be reduced if taking it before 60.

You could also defer doing anything with them as a whole or with any excess after you've taken the tax free cash, until a later date, up to a maximum age of 75.

[Hawkey99]

Very interesting.

Currently my AVCs (flexiplan & bonus plan) if I took them both would mean I had to pay a small amount of tax (in the 100s) as Id be over my 25% tax free.

But with just my NRA 60 and Flexiplan I would pay no tax and the Bonusplan & DBCBS would be used as my lump sum when I take my NRA 65.

You know what the most unpleasant thing about all of this is.......That I would suggest over 90% of employees don't know what to do and when to do things to provide them with maximum income and minimum tax.

Thanks Robert.

[heapsy]

Very interesting.

Currently my AVCs (flexiplan & bonus plan) if I took them both would mean I had to pay a small amount of tax (in the 100s) as Id be over my 25% tax free.

But with just my NRA 60 and Flexiplan I would pay no tax and the Bonusplan & DBCBS would be used as my lump sum when I take my NRA 65.

You know what the most unpleasant thing about all of this is.......That I would suggest over 90% of employees don't know what to do and when to do things to provide them with maximum income and minimum tax.

Thanks Robert.

You're right. Also, there is a huge dollop of apathy amongst the work force nation wide, not just in RM. People want it all now and don't really think about the future. The situation hasn't been helped by governments, both Tory and Labour meddling with pensions. It has not only caused great confusion, but instilled a sense of hopelessness. People just don't think it is worth it. You also have those who believe the state should, and WILL look after them when they get older.

[Hawkey99]

Does anybody know how much the pension rose by this year.

Reason for asking is I had a forecast last year at 55 of NRA 60 and NRA 65 and I want to know how much it went up by in September.

Also if I intend to take my NRA 60 when Im 56 I assume I add 5% to the total.

EG Annual Pension £5000

5% extra for extra year £5250.

£5250 x 3% (example of inflation) = £5406

Is that correct ?

[RobertT]

Does anybody know how much the pension rose by this year.

Reason for asking is I had a forecast last year at 55 of NRA 60 and NRA 65 and I want to know how much it went up by in September.

Inflation figures are released 1 month is arrears, so Septembers' aren't announced until October – the 17th I believe. And they're not applied to our pensions until 31st March of the following year.

The September 2017 figures were:
RPI = 3.9%
CPI = 3.0%

Also if I intend to take my NRA 60 when Im 56 I assume I add 5% to the total.

EG Annual Pension £5000

5% extra for extra year £5250.

£5250 x 3% (example of inflation) = £5406

Is that correct ?

I would have thought starting from your unreduced figure would give you a more accurate amount.

For example:

Your NRA60 at 60 =£10,000 – 20% for taking it at 56 = £8,000

Rather than:

Your NRA60 at 60 = £10,000 – 25% for taking it at 55 = £7,500 + 5% for taking it at 56 instead = £7,875

You'd also have to factor in any more pension you built up from the date of your quote, to 31st March 2018 when the RMPP closed to future accrual.

[Navalron]

Very interesting.

Currently my AVCs (flexiplan & bonus plan) if I took them both would mean I had to pay a small amount of tax (in the 100s) as Id be over my 25% tax free.

But with just my NRA 60 and Flexiplan I would pay no tax and the Bonusplan & DBCBS would be used as my lump sum when I take my NRA 65.

You know what the most unpleasant thing about all of this is.......That I would suggest over 90% of employees don't know what to do and when to do things to provide them with maximum income and minimum tax.

Thanks Robert.

You're right. Also, there is a huge dollop of apathy amongst the work force nation wide, not just in RM. People want it all now and don't really think about the future. The situation hasn't been helped by governments, both Tory and Labour meddling with pensions. It has not only caused great confusion, but instilled a sense of hopelessness. People just don't think it is worth it. You also have those who believe the state should, and WILL look after them when they get older.

Yes but the sad FACT is that people these days cannot save enough into their pension funds when working part time. This saves companies including RM a lot of money as a good percentage of the workforce opt out of the pension which then saves the company from making contributions. Also as a part time worked you are more likely to be paying lower national insurance contributions, which lowers the employers payment of contributions. All this so that the fat bastards at the top can get more dividend payments on their shares. Let's face it the working man might have a few shares here and there but it's just scrape to keep us, or so they think, happy. Time for civil unrest.

[heapsy]

You're right about the saving / investing issue. A real conundrum if ever there was one. No chance of ever having any meaningful protest in this country, even the ordinary worker is mainly out for him / her self, and don't generally see the bigger picture.

[compostcorner]

my lump sum illustration 4 years ago retiring at 60 was 56,000, my illustration i recieved today was 29,000, i dont understand pensions but surely i cant have lost that much