2 years to go before NRA60

[NWpostie]

Well with 2 years to go before I can claim my NRA60 (and maybe NRA65) , I've saved up a considerable amount in my AVC as I regularly check on my AVC performance, at present my Flexiplan is at £58,500 (Growth) and Bonus plan (growth) at £10,500 and personal savings of £23,500, I plan to continue saving up.like mad for the next two years before taking my NRA60, I'm also considering taking my NRA 65: early.

Any advice and pitfalls I should consider before I decide to jump ship, such as the process of claiming it and any tax liabilities I need to consider etc. dividing lump sum over the 7 years before I claim state pension.

Who else has gone through this process ?

* I'm still saving up into my bank account and I'm also paying into the collective plan lump sum booster and £50 a week nto my AVC CDC (growth). I'm debating leaving it or claiming early.

[RobertT]

Here's few things to consider:

1. They should send details automatically 3-4 months(I can never remember exactly how long) before you reach 60.
2. Decide whether you want full pension or max lump sum, or somewhere in between.
3. Send forms back as soon as possible to avoid any delays.
4. RMSPS/Capita are known for being slower than RMPP, so factor that in just in case you have to do without that money for a few weeks or even months.
5. Will all of the AVC's be tax free with age60?
6. If not, how do you plan to take the excess?
7. How much DBCBS will you get and how much will be tax free?
8. Factor in all taxable income in any one financial year to find out total liability.
9. Work out if you can save any tax that might otherwise be payable, like moving money into ISA's instead of normal savings accounts.
10. Shop around for better savings rates.
11. Look at what your outgoings are now and how they might change in retirement. Whatever you do with your time will probably cost money in one way or another - some expenses might go down, but others might go up!
12. Is the total RM and state pension(and any others you may have) enough to live on going forward into your 70's, 80's and potentially beyond?
13. Have you factored in the tax you'll pay on that going forward?
14. Have you got a rainy day fund for emergencies?

There's probably lots more......

[NWpostie]

Interesting points, hopefully the AVCs that is intended to cover the lump sum will be totally tax free and of course my savings will be part of that.

I've been advised to save at least 12 months salary as a contingency for any unexpected expenses, house and car are all paid for, no personal debts.

My concern would be what will happen between now and the next two years as a privatised company, my place in the scheme and the pension scheme itself of course, Kretinsky has promised to keep the company as it is for 5 years in the UK, after that anything goes, he may even cancel that deal in two or three years., there's so much uncertainty at the moment.

[RobertT]

As a rough guide, I would think your Age60 pension would need to pay out £10k or so per year for all your £69k of AVC's to be tax free.
Anything less than that and you've got an excess to decide how to take – as a UFPLS or transfer to personal pension.
But I assume you've already done your maths on that?

Any changes to pensions usually only apply going forward, I don't think they're allowed to make retrospective alterations anyway?

In the case of the RMCPP, even if they decide to close the scheme at some point in the future, you won't just lose what you've built up. It will either still be paid out in the same way as planned, or you'll get a transfer value to move it to a personal pension.

The RMSPS is paid for by the government/taxpayer and the RMPP is currently heavily in surplus and it's continued good shape isn't dependant on the success of the company. So no obvious reasons to be worried about those at the moment.

[NWpostie]

As a rough guide, I would think your Age60 pension would need to pay out £10k or so per year for all your £69k of AVC's to be tax free.
Anything less than that and you've got an excess to decide how to take – as a UFPLS or transfer to personal pension.
But I assume you've already done your maths on that?

I guesstimated the amount, by the time I reach 60 I will have put in 40 years service, I started in 1987 and been in the scheme from day one.

£10,000 would equate £192 a week if I don't take anything out of my pension instead I'll be using my AVC to fund my lump sum which at current rate divided over 8 years to overlap the period of claiming my state pension to account for any administrative delays.

So £69,000 divided by 8 years = £8,625 again divided by 52 weeks = £165, total weekly +£192 estimated income £357.

A fairly decent income again this is just a ball park figure.

[RobertT]

40 years is a decent sentence!
I started in the same year and it sounds like we're both in section C? But I got out when I hit 36 years service.

I think you should be OK, with your AVC's and other savings making a big difference to your basic pension entitlement – a good example of why it's good idea to save extra!

It's scary looking back at what the RM pension was like back then, compared to now.

Had there been no changes along the way, 40 years service would have given you a full 2/3rds final salary pension at 60(allowing for the section C Lower Earnings Deduction).

But as it is you'll have:

23 years of Age60 benefits(21 final/2 average salary)
8 years of Age65(average salary)
6.5 years of DBCBS(also Age65)
3 years of RMCPP

[NorthernBoy]

From your post I would say you are in a great financial position and the advice given has been really good.

As someone who is currently going through the process and has just selected my pension options, here is what else you may want to consider.

Firstly I would contact RMPP and RMSPS today and ask them to send you your figures as if you were to take them today. This will give you accurate information from which you can base the rest of your planning. I would ask for all NRA60/65, all pension info.

You will have numerous options between taking full pension, a reduced pension and lump sum (from your pension), a full pension and your AVCs. Having these actual numbers will be very useful.

Your approach about using your lump sum (AVCs) to add to your income between now and state pension is one I think many people do and I can see the attraction.

Personally I am taking my lump sum by reducing my pension and then transferring my AVCs out and drawing them down. This allows me to front load my income and I reckon it will take about 20 before I am worse off.

What’s also worth considering is transferring your AVCs from the growth fund to the cash funds to reduce risk. You have to ask yourself how you would feel if the market drops 20% prior to you taking them. No right or wrong answer to this.

Good luck with your plan.