Lump sum calculation

[Rapido123]

Hi, I have just been working out how to calculate my lump sum these are fictional figures they are not my own. I just want to know if anybody is able to tell me if this is the correct way to work it out. I am in section C.

Annual pension £10k x 20 = £200k

+ £20k avc

+ £20k cash balance

= £240k x 25%

So lump sum is £60k

Thanks in advance

[RobertT]

The majority of the Cash Balance(DBCBS) is payable with NRA65 benefits, so you need to work out NRA60 and NRA65 separately.

The best way is to assume your pension equals 75% of your pot, therefore the maximum tax free lump sum is the other 25%.

For example:

NRA60 = £9,000 x 20 = £180,000. Max tax free lump sum = £60,000.
NRA65 = £3,000 x 20 = £60,000. Max tax free lump sum = £20,000.

Any excess cash, once the tax free lump sum has been paid by AVC's and DBCBS, can be taken as a Uncrystalised Pension Funds Lump Sum. Which means the first 25% of that is also tax free, with the remainder being classed as income and coming under normal PAYE income tax rules.

[Wat69]

Robert my 60 and 65 figures are similar to yours but the bit I struggle with is the AVC and cash balance I have about £30000 in AVC and cash balance must be about £25000 so does that mean I can use this amount to fund my £60000 lump sum without a reduction on my pension payment?

[RobertT]

Robert my 60 and 65 figures are similar to yours but the bit I struggle with is the AVC and cash balance I have about £30000 in AVC and cash balance must be about £25000 so does that mean I can use this amount to fund my £60000 lump sum without a reduction on my pension payment?

Most of the DBCBS is attached to your NRA65, but you can use some of it to fund the NRA60 lump sum. At the moment that's very roughly 10-20% of your DBCBS pot.

Therefore you can use the whole £30k in AVC's, plus a max of about £5k of the DBCBS to fund the NRA60 lump sum. If you want a higher lump sum you'll have to give up some pension.

The remainder of the DBCBS can be used to fund the lump sum with the NRA65.

[Wat69]

Thanks Robert I did plan to increase my AVC payments but o believe we can’t pay into them when new pension start’s although god knows when that will happen?

[Rapido123]

Thanks, if i were to take all benefits at age 60 and assuming the reduction for the age 65 pension could i use both my avc and cash balance to fund my lump sum ?

[RobertT]

Thanks Robert I did plan to increase my AVC payments but o believe we can’t pay into them when new pension start’s although god knows when that will happen?

We won't be able to pay into Flexiplan or Bonusplan, but there will be alternative AVC arrangements via the new CDC scheme.

[RobertT]

Thanks, if i were to take all benefits at age 60 and assuming the reduction for the age 65 pension could i use both my avc and cash balance to fund my lump sum ?

See my posts above^.

[Rapido123]

[Wullie10]

My annual pension is stated as 12,000 but that includes pension supplement of £1,300 . So as ill not be leaving RM just yet is that 12000 minus 1300 x 20 ?

[RobertT]

My annual pension is stated as 12,000 but that includes pension supplement of £1,300 . So as ill not be leaving RM just yet is that 12000 minus 1300 x 20 ?

If you're in RM employment when taking your pension, the supplement won't be included in the calculations.

If you've left, it will be.

If you plan to leave at the same time as taking your pension, it's best to make sure the RMPP and RMSPS know that, because it should be included in that scenario.

[Rapido123]

If you take all of your pension at 60 and leave Royal Mail employment, do you get the pension supplement for your age 65 benefits and is it reduced, thanks

[RobertT]

If you take all of your pension at 60 and leave Royal Mail employment, do you get the pension supplement for your age 65 benefits and is it reduced, thanks

Yes and yes.

[Rapido123]

Thanks for your help

[tractorboy2]

If you take all of your pension at 60 and leave Royal Mail employment, do you get the pension supplement for your age 65 benefits and is it reduced, thanks

Yes and yes.

If you're leaving Royal Mail employment after receiving your Age 60 benefits , and they know you're leaving , will they automatically add the supplement when you do leave ?