Defined Benefit Cash Balance

[freespeech]

As this builds up each year with 6% contributions by members and 13.6% by the company I'm struggling to understand why this is reduced if taken before NRA65. Isn't it just a fund that I have contributed to or is that too simplistic? If taken with NRA60 benefits at 55 I'm assuming there is a 50% reduction based on 5% per year 10 years early?

[RobertT]

The DBCBS has an NRA of 65 and is designed to fund some or all of the tax free cash associated with RMPP(2012-2018) benefits. The original plan was for it to be 'attached' to RMSPS benefits aswell, but the Cabinet Office refused that request. We got a letter late 2019 explaining it.

RMPP benefits are those 6 years from 2012 to 2018, plus 'any increase in pre 2012 benefits in excess of statutory increases, attributable to increases in pensionable pay'(source-RMPP website).

Therefore the amount of your DBCBS pot you can take with your NRA60 benefits should be minimal, based on a few posts on this forum, it's only £300-400 in money terms.

However there have also been people on here who've sworn blind they or their mate did take all of their DBCBS pot with their NRA60. Whether they were mistaken or whether the pensions dept. paid it out when they shouldn't have done(before the cabinet office ruling?), I don't know.

There has also been some debate as to how much, if any, reduction to the DBCBS there is for taking it early. The consensus is that it's not as much as 5% per year, but nobody seems to know how much it actually is. The RMPP website says:

After you’ve reached 55, your employer may allow you to choose early retirement.
If you do retire early, your benefits will be calculated based on what you have built up at the date of leaving. Your pension and lump sum (including your Cash Balance fund) will be reduced because they’re being paid early.

[NWpostie]

The best option really if you can is to take the benefits when they're due at 60 then 65 plus any AVC you have built up as part of your lump sum to divide over 7 years to state pension age 67.

This way you lose nothing in deductions, once you take your pension early that's it, you're stuck at that reduced pension for the rest of your retirement, it will not go back up once reached NRA60 NRA65.

Of course your circumstance will be unique to ok, generally its better to play the long game and consider the implications of your decision.

[david3595]

My DBCBS Tax Free Lump Sum was £1656 when I took my NRA60 at 55 this January ( personal reasons it suited me take it at this age ). I don’t know what percentage if any was reduced as I don’t know what the pot value was at the time of taking my NRA60 but it does state on letter that I will receive that rest of my DBCBS pot when I take my NRA65.

[TheStrangler]

Probably worth noting that the pension supplement is apparently also reduced by 5% a year for taking it early as it's linked to nra60.

[stephen500]

Note I have been told two different things by two different people at RMPP.
First that my deduction for taking DBCBS 5 years 2 months early will be about just under 25% (5% per year) and some one else who thought it would be about 0.5% per year, making it about 3% for me. I hope the 2nd person is right, although I fear the first one is!
I will let you know when I get my quote, if they tell me.

[freespeech]

The best option really if you can is to take the benefits when they're due at 60 then 65 plus any AVC you have built up as part of your lump sum to divide over 7 years to state pension age 67.

This way you lose nothing in deductions, once you take your pension early that's it, you're stuck at that reduced pension for the rest of your retirement, it will not go back up once reached NRA60 NRA65.

Of course your circumstance will be unique to ok, generally its better to play the long game and consider the implications of your decision.

That is true but I assume that even the reduced rates will still get the yearly pension increase?

[stephen500]

The best option really if you can is to take the benefits when they're due at 60 then 65 plus any AVC you have built up as part of your lump sum to divide over 7 years to state pension age 67.

This way you lose nothing in deductions, once you take your pension early that's it, you're stuck at that reduced pension for the rest of your retirement, it will not go back up once reached NRA60 NRA65.

Of course your circumstance will be unique to ok, generally its better to play the long game and consider the implications of your decision.

That is true but I assume that even the reduced rates will still get the yearly pension increase?

Yes.

Seperatly -The only thing that does NOT go down with a reduced pension is the Widows pension as far as taking the max lump sum is concerned, that widows pension stays the same, although both will actually reduce in line with the reductions for early payment (section B, I have no idea about section C)