Tax free lump sum

[arsenalbob]

I’m 65 in March 2021 so should have 3 years cash balance pension by then amounting to about£13,000 plus about £8,000 from my AVC account. Would I expect to pay tax on this total of £21,000. My NRA 60 and 65 pensions should amount to about £8,000 per year combined. I’m not sure what the tax threshold is. Thanks

[RobertT]

I assume you've already taken your NRA60 benefits, so just do the normal maths using your NRA65:

NRA65 pension x 20 + supplement(section C)* + standard lump sum(section B) + DBCBS + AVC's = total pot value
You can take 25% of your total pot value as a tax free lump sum.

*If you're planning on continuing to work for RM, don't include the supplement in your calculations.

If your NRA65 benefits are anything like mine(section C), your DBCBS and AVC's will hit the 25% limit, give or take a bit. So no tax, or only a small amount of tax will be payable.
But obviously everyone will be different.

If you haven't already taken your NRA60, then tax won't be an issue an all, but you'll have missed out on 5 years of pension that you'll never get back.

[stephen500]

I’m 65 in March 2021 so should have 3 years cash balance pension by then amounting to about£13,000 plus about £8,000 from my AVC account. Would I expect to pay tax on this total of £21,000. My NRA 60 and 65 pensions should amount to about £8,000 per year combined. I’m not sure what the tax threshold is. Thanks

Are you in section B or section C.
NRA 65 (most of the cash balance is used towards your NRA 65)
If you are in Section B your cash balance can be used in around three ways.
To put towards an annunity
To transfer to another provider
To take it all an an unfunded scheme (25% tax free and 75% taxable at your tax rate)
Or to take a larger pension (with no standard tax free cash and just the cash balance tax free
Or as I have option 2A (section B only) which allows me to have an unreduced pension, whilst keeping the tax free standard amount and to use as much of of my cash balance (DBCBS) to make up my tax free cash to as near as possible to what would have been my Max tax free cash amount (if I had taken option 2). What is left of the cash balance is known as an excess DBCB and 25% of that is tax free and 75% taxable at your tax rate. I think option 2A is the most tax efficent way of using your cash balance.
If you are in section C I think you can convert 25% of your pension pot into a tax free lump sum for a 25% reduction of your yearly pension and for your cash balance can choose an annuity or to move to another provider or to take the Cash balance as "unfunded" which means you can have it 25% tax free and pay tax on 75% at your tax rate. (normally 20%)
The slides I have attached are for section B.
For section C the choices are different numbers and letters
For any supplements I defer to Robert T for that advice
If your cash balance is around £13,000 then I am guessing your NRA 65 figures will match mine below.

choices RMPP.jpg

I have accidently attached two of this choice forms!

choices RMPP.jpg

[arsenalbob]

Thanks for the replies. I’m in section C and took the NRA 60 pension at age 54. I couldn’t remember how to work out out the total of the pension pot so this has helped. I’m expecting the total to be around £84,000 so £21,000 lump sum should just escape paying tax