VR & pension

[fly-catchers]

I have been given the option to take VR which although tempting is nerve wrecking to make sure you make the right choice. I am 57 with 27 years at RM mostly FT apart from the first 6 months. I am in RMPP C and have ADDED Years AVC which together with a transfered in pension gives me just over 30 years of the Final salary part of the pension. I had 1 year 49 days left to pay on the Added years when we got the statment for March 2014. The VR offer is of course for 26 weeks plus "enhanced pension". I have read that if you withdraw from the RMPP you would get 104 weeks salary and reductions on the pension (5% off each year?) Once the VR reaches you is it too late to try for the 104 week option? They want my decision by Monday!! I would say I was about the last person where VR is even remotely a good idea as most of the people behind me are either younger or more recent to RM. I just missed out on the better A/B pension by a year and a bit!
As nobody in front of me has gone for VR despite their better pensions wonder if it worth going for it or not. Since "Methods" was introduced last year the pressure and stress from the job has increased no end. And a continuing knee issue does not help matters!

There was a suggestion that you pay more tax on the pension if you take it before your 60th birthday is that correct? And I assume the lump sum shown the VR statement where you take a reduced pension is also taxable or is that covered by the 25% tax free lump sum they always go on about? I also have a Bonus plan AVC with about £10000 in it. If I took that as a lump sum I assume that I would pay tax somewhere along the way?

On the VR statement it has a column which saids "cost in"- with Yes against it- whats that?

Cheers for any info!!

[RobertT]

I have been given the option to take VR which although tempting is nerve wrecking to make sure you make the right choice. I am 57 with 27 years at RM mostly FT apart from the first 6 months. I am in RMPP C and have ADDED Years AVC which together with a transfered in pension gives me just over 30 years of the Final salary part of the pension. I had 1 year 49 days left to pay on the Added years when we got the statment for March 2014. The VR offer is of course for 26 weeks plus "enhanced pension". I have read that if you withdraw from the RMPP you would get 104 weeks salary and reductions on the pension (5% off each year?) Once the VR reaches you is it too late to try for the 104 week option? They want my decision by Monday!!

It sounds like you’re a bit late to opt out of the RMPP, if you’d done it 2 or 3 weeks ago you’d have stood a better chance.

I would say I was about the last person where VR is even remotely a good idea as most of the people behind me are either younger or more recent to RM. I just missed out on the better A/B pension by a year and a bit!

I missed out on the A/B pension by about 2 months!!!!!!

As nobody in front of me has gone for VR despite their better pensions wonder if it worth going for it or not. Since "Methods" was introduced last year the pressure and stress from the job has increased no end. And a continuing knee issue does not help matters!

Only you can answer that question, but if I was your age, I’d jump at it.

There was a suggestion that you pay more tax on the pension if you take it before your 60th birthday is that correct?

How much tax you pay will depend on how much you earn. Everything upto £10,600 is tax free in this tax year. Your monthly pension is counted as income.

And I assume the lump sum shown the VR statement where you take a reduced pension is also taxable or is that covered by the 25% tax free lump sum they always go on about?

Redundancy payments below £30,000 are tax free. If you take a lump sum from your pension that will be tax free aswell.

I also have a Bonus plan AVC with about £10000 in it. If I took that as a lump sum I assume that I would pay tax somewhere along the way?

You can use that to fund some or all of your tax free pension lump sum, therefore preserving more monthly income.

On the VR statement it has a column which saids "cost in"- with Yes against it- whats that?

I’m sure somebody might know but I haven’t a clue, sorry.

[fly-catchers]

Thankyou for your very helpful (as always) replies Robert.

The compensation for VR is about £12000 which I assume from your reply is tax free. So am I correct in saying I could get a further £18000 from my pension lump sums without paying any tax. But over that I would pay tax?

I would assume that if I had come out of the RMPP some weeks/months ago and the VR was taken by somebody else I could not have rejoined the scheme?

I read elsewhere that you did not think that somebody taking VR would be entitled to their free shares. Does EVR which I assume is what I might get is the same?

[N1-22postman]

"They want my decision by Monday!" - Does this mean you have to hand in the signed response sheet at the end of a 10 page "Offer of Voluntary Redundancy" document which you have had for nearly 2 weeks. Initially you get an offer printed out in table form on one sheet which has the column "cost in" that you mentioned and if it is this that you have to agree to, then you may have time, otherwise it probably is too late to opt out of all RMPP (it took me 2 weeks) to enable you to get the 104 weeks offer. Have they given you a last day of service "LDOS" yet?
Because of my age at 63 the enhanced pension part of the offer did not seem as good (they enhance it by up to 6.66 years) as getting 104 weeks lump sum so I came out of RMPP and they changed my offer in time.
You do not mention your enhanced pension figures but in your case at 57 you have more time to receive more annual pension payments (hopefully you have long to live) and the case for getting 104 weeks lump sum is not so advantageous.
Best of luck with your decision.
You pay no tax or National insurance on the first £30,000 of a redundancy lump sum.
You pay no tax on your pension lump sum.
You will be entitled to your free shares as you will be classified as a "good leaver".

[RobertT]

Thankyou for your very helpful (as always) replies Robert.

The compensation for VR is about £12000 which I assume from your reply is tax free. So am I correct in saying I could get a further £18000 from my pension lump sums without paying any tax. But over that I would pay tax?

My understanding is that you will get 2 tax free lumps sums. A max of £30k from the redundancy, so with £12k you’ll be ok there. Plus a max of 25% from your pension including your Bonusplan.

I would assume that if I had come out of the RMPP some weeks/months ago and the VR was taken by somebody else I could not have rejoined the scheme?

Correct, once you’ve stopped paying into the RMPP you can’t restart contributions again. Although I believe you can join the RM Defined Contribution Pension instead.

I read elsewhere that you did not think that somebody taking VR would be entitled to their free shares. Does EVR which I assume is what I might get is the same?

Yes I think I can remember saying that and to be fair I got that wrong. Taking VR/EVR counts as being a ‘good leaver’ so you will get to keep your shares.
Details can be found on page 23 here: https://www.myroyalmail.com/sites/defau ... ochure.pdf" onclick="window.open(this.href);return false;

[fly-catchers]

"They want my decision by Monday!" - Does this mean you have to hand in the signed response sheet at the end of a 10 page "Offer of Voluntary Redundancy" document which you have had for nearly 2 weeks. Initially you get an offer printed out in table form on one sheet which has the column "cost in" that you mentioned and if it is this that you have to agree to, then you may have time, otherwise it probably is too late to opt out of all RMPP (it took me 2 weeks) to enable you to get the 104 weeks offer. Have they given you a last day of service "LDOS" yet?
Because of my age at 63 the enhanced pension part of the offer did not seem as good (they enhance it by up to 6.66 years) as getting 104 weeks lump sum so I came out of RMPP and they changed my offer in time.
You do not mention your enhanced pension figures but in your case at 57 you have more time to receive more annual pension payments (hopefully you have long to live) and the case for getting 104 weeks lump sum is not so advantageous.
Best of luck with your decision.
You pay no tax or National insurance on the first £30,000 of a redundancy lump sum.
You pay no tax on your pension lump sum.
You will be entitled to your free shares as you will be classified as a "good leaver".

"They want my decision by Monday!" was a comment by the DOM who is always wanting instant decisions! All I have so far is the one sheet tablet form with Est LDOS as 05/09/2015. My enhanced pension is £11878 plus POPS supplement of £2225. This works out a bit more than the overall pension I would have received at age 60 where I would get a 25% reduction on the NRA 65 part. And I certainly cannot see myself wanting to stay beyond 60 if that!

If you agree to the VR do they take any leave not taken into account?

[N1-22postman]

With an estimated last day of service 10 weeks away you may still have time to come out of the RMPP but you have to be quick and contact HR on Monday and get the ball rolling. You can agree to accept VR with the DOM but inform him that you are coming out of the pension immediately in order to get an offer of 104 weeks lump sum. Phone VR helpline 0n 08456060603 and inform them that you are exiting the pension and explain why.
However your enhanced pension offer seems good for 30 years service ( my offer was less for 37 years) and if your health is good, in the long term you may be as well off as taking the 104 weeks lump sum combined with a smaller pension. If you have a partner they will benefit from the enhanced pension if you predecease them. Having a larger lump sum may help your own personal circumstances but it is difficult to make a decent return these days on money whereas your enhanced pension will increase each year with inflation.

[baldrick]

On the VR statement it has a column which saids "cost in"- with Yes against it- whats that?

I think that any VR offer has to be within a cost limit, and this just means your VR is within that limit.

[baldrick]

If you agree to the VR do they take any leave not taken into account?

Yes you will have to take any outstanding leave before your Last Day of Service. I had about 2 weeks AL due, so I actually finished 2 weeks before my LDOS.

[fly-catchers]

Thanks for all the help & advice.

N1-22postman- Thanks for very useful info and good to hear from a postie who has gone through it all!

baldrick- Thanks. I assume the AL is all that you have booked for that financial year? That will mean 4 weeks if I am due to leave around September. I have a week coming up in September and others in November/jan/march.

Just double checking but on my EVR statement I can either have £11878 plus supplement or £8565 plus supplement & £71000 lump sum. Am I right in thinking that £30000 of the lump sum is tax free and the remaining £41000 is taxed? At 20 or perhaps 40%?

cheers

[TrueBlueTerrier]

I assume the AL is all that you have booked for that financial year?

Not booked, but accrued leave. You only get a full year entitlement if you do a full leave year.

Basically you accrue 8.3% leave for each full month from April.

start of April to end of September is 6 months so you'll be entitled to 1/2 your annual entitlement.

From what you said that means they'll probably let you go 1 to 2 weeks early depending on what your full years entitlement is.

[baldrick]

baldrick- Thanks. I assume the AL is all that you have booked for that financial year? That will mean 4 weeks if I am due to leave around September. I have a week coming up in September and others in November/jan/march.

Just double checking but on my EVR statement I can either have £11878 plus supplement or £8565 plus supplement & £71000 lump sum. Am I right in thinking that £30000 of the lump sum is tax free and the remaining £41000 is taxed? At 20 or perhaps 40%?

As TBT says you will get any AL accrued for the current year (and any AL carried over from last year if any), so probably about 2 weeks.

I'm not sure if the lump sum you are quoting is pension lump sum or pension lump sum plus VR lump sum.

You do not pay tax on pension lump sum, there is no limit on that. So if it is all pension lump sum you would not pay any tax on it.

The first £30k of any redundancy is tax free. You pay 20% standard rate tax on any amount over that. Anything over the higher tax limit (I can't remember the exact amount offhand but it's around £42,600 iirc) will be taxed at 40%.

Edit: Note that although the pension lump sum and the first £30k of VR is paid tax free, it does count towards your taxable earnings for the year, so will probably take you into the higher tax rate for the rest of the tax year. So you will be taxed at 40% on your pension, and any earnings if you take another job, until next April.

[goddard7]

Colleagues at my mailcentre informed management that they had left RMPP scheme(literally only days before) and asked for a recalculation,instead of 6 months,they were both offered 1o4 weeks,i believe this has become quite common and they have reacted to this by speeding up the process.

[fly-catchers]

[
I'm not sure if the lump sum you are quoting is pension lump sum or pension lump sum plus VR lump sum.

You do not pay tax on pension lump sum, there is no limit on that. So if it is all pension lump sum you would not pay any tax on it.

The first £30k of any redundancy is tax free. You pay 20% standard rate tax on any amount over that. Anything over the higher tax limit (I can't remember the exact amount offhand but it's around £42,600 iirc) will be taxed at 40%.

Edit: Note that although the pension lump sum and the first £30k of VR is paid tax free, it does count towards your taxable earnings for the year, so will probably take you into the higher tax rate for the rest of the tax year. So you will be taxed at 40% on your pension, and any earnings if you take another job, until next April.

The £71000 is the pension lump sum if I take a reduced pension. The VR lump sum is £12000. I also have an AVC worth about £10000. So if I took all that I would not pay tax but would payt a the higher rate 40% on my pension till April? Is that correct? But if I took the higher pension (no lump sum) and the VR of £12000 and the AVC £10000 as cash I would not pay any tax on that and would remain at 20% on my pension?

[baldrick]

The standard rate tax (20%) is payable for all earnings from £10,600 (Lower Earnings Limit) to £42,385 for the 2015/16 tax year.
If your total earnings are over £42,385 the tax rate is 40%, but only for the amount over £42,385. Anything below that is still taxed at 20%.

Disclaimer: I am not a pensions or tax consultant. But that is what happened when I took VR. I did receive a tax rebate the following tax year, but I don't know why that was.