Pension ....Start Again

[Hawkey99]

I am 55 in February 2018.

Can I take both of my current pensions and start the new DC scheme if I wish ???

Thanks

[TrueBlueTerrier]

http://www.royalmailchat.co.uk/communit ... 27&t=77960" onclick="window.open(this.href);return false;

25. Would my pension be safer if I take it early?

As the Company’s proposal would only affect the build-up of future pension benefits, there is no advantage in taking your pension early to avoid any changes brought about by the proposal. In fact, taking your pension benefits early could disadvantage you in the future by reducing your ability to build up additional pension benefits.

Under our proposal, we remain committed to not making any changes before April 2018, subject to certain conditions. You would continue to build up benefits as you do now until 31 March 2018. No changes would come into effect before April 2018.

If our proposal was implemented, it would be a very competitive pension package compared to our industry and other large employers. The Company would continue to make a significant contribution to your pension.

You can but as you would lose 5% per year on each pension is it worth it. However, not sure if you can take the NRA65 10 years early, if you can you'd lose 50% of it.

[Surreypostie]

Yes TBT you can but as you say you would loose 50% of it.

[RobertT]

As has already been said, if you take your RMPP early it would be reduced by 5% per year, so taking both at 55 would result in a 25% reduction in your NRA60 pension and a 50% hit on your NRA65 pension.

But if you’re going to continue working for RM, what’s the point in taking your pension early anyway? You’ll just be making the effects of the impending closure of the RMPP even worse and in the process quite possibly extending your working life and making yourself worse off in retirement.

[Hawkey99]

Hi Robert and all,

My logic was to take both of my pension (NRA 60 & NRA 65) at 55 by which time the scheme would be closed.

Then pay all or nearly all of my wage (to avoid the tax) into the new scheme for 2 years until I retire.

Always value your opinion so just wondered if this makes sense. Also to add a bit of realism whilst know one knows the future my family dont seem to make it much past 75 historically.....

Thanks for your superb contributions.

[Hawkey99]

Any thoughts ????

[RobertT]

It seems a bit topsy turvy to me but whether it’s a realistic thing to do is going to be very individual to a large degree, but you will have to consider a number of factors:

1) Can you afford to live on that reduced NRA60/NRA65 income and if not, what other income will you have between the ages of 55 and state pension age and possibly beyond?

2) What are you going to do with the DC pot after 2 years;
i) buy an annuity
ii) take it out as cash
iii) draw it down over time

3) Have you considered the tax implications of the above?

4) Have considered any possible falls in the value of the DC pot and how it would impact your plans?

5) When will you get your state pension and how much will it be?

6) Do you have a partner and what will they bring to the table in terms of wages, pension, state pension?

7) Do you have any major outgoings – mortgage, rent, putting kids through uni, etc?

8) Will the family health history apply to you considering the reasons behind it and your own health?

I could go on.

[stephen500]

http://www.royalmailchat.co.uk/communit ... 27&t=77960

25. Would my pension be safer if I take it early?

As the Company’s proposal would only affect the build-up of future pension benefits, there is no advantage in taking your pension early to avoid any changes brought about by the proposal. In fact, taking your pension benefits early could disadvantage you in the future by reducing your ability to build up additional pension benefits.

Under our proposal, we remain committed to not making any changes before April 2018, subject to certain conditions. You would continue to build up benefits as you do now until 31 March 2018. No changes would come into effect before April 2018.

If our proposal was implemented, it would be a very competitive pension package compared to our industry and other large employers. The Company would continue to make a significant contribution to your pension.

You can but as you would lose 5% per year on each pension is it worth it. However, not sure if you can take the NRA65 10 years early, if you can you'd lose 50% of it.

You can take it ten years early, I know several postpersons that have, But you are right, you will lose 50% on NRA65 and 25% on NRA60

[Hawkey99]

So as I mentioned in a earlier post it is possible to take your NRA 60 and NRA 65 but continue to pay into the new scheme.

If I then paid most of my wage into the new AVC (up to the lowe earning limit) I would have the benefit of tax relief and also pay less tax due to lower earnings.

Thanks

[RobertT]

So as I mentioned in a earlier post it is possible to take your NRA 60 and NRA 65 but continue to pay into the new scheme.

Yes.

If I then paid most of my wage into the new AVC (up to the lowe earning limit) I would have the benefit of tax relief and also pay less tax due to lower earnings.

Technically you’re allowed to pay all or almost all of your wages into a pension each year, but if you go over certain limits you won’t be able to participate in PSE, which is a valuable extra benefit.

I refer you to the PSE booklet for further info: http://www.myroyalmail.com/sites/defaul ... %20WEB.pdf" onclick="window.open(this.href);return false;

There is also a thread on the subject of PSE & extra pension payments here: http://www.royalmailchat.co.uk/communit ... 27&t=76631" onclick="window.open(this.href);return false;

[grabber]

i will be 60 in october 2018 after 35 years service so calculated my my options if take all my pension nr 60 and nr 65 i will be £101 per year worse off so if live till 80 yr old i will be £2525 worse off in this scheme

but if end up taking my nr 60 and nr 65 at 65 i will be £1197 per year worse off so iflive till 80 yr old i will be £23940 worse off

but they can still aford to give mora green £1.5 million in pay dont supose her pension been affected
i also dissagree with royal mail paying all our pension money out in dividends been shafted again

[Hawkey99]

Hi Robert,

Thank you for your reply. Basically I have a partner who also has an income.

The main reason for drawing the pension early is to pay most of wage into the new scheme and avoid paying any very little tax for 2 years. Fully understand the issues of reduction in the NRA 60 & 65 pensions.

After 2-3 years intend to draw down the DC scheme after taking the 25% tax free. Will also pay in AVCs during this time.

Just checking from a tax benefit point of view.

[RobertT]

Income tax is paid on earnings after pension contributions have been deducted, so there are obvious tax benefits from paying more into your pension. But as I said in an earlier post, if you pay too much in you’ll effectively be opting yourself out of PSE, which is another valuable benefit. So paying what it takes to stay in PSE and putting the rest into a private pension would negate that. In practice you may be paying more tax than you want to on your RM wages, but you’ll effectively get it back via the PP.
You can always amalgamate the two pensions at a later date to make withdrawal easier!

From a money point of view you’ll have to work out whether what you lose over the course of your retirement from taking your NRA60+NRA65 pension early plus any lost PSE benefits, will be outweighed by what you’ll gain in tax savings. But any loss of overall income may be a price worth paying if it enables you to retire early?

[Hawkey99]

Hi Robert,

Just trying to understand about PSE. You said

"From a money point of view you’ll have to work out whether what you lose over the course of your retirement from taking your NRA60+NRA65 pension early plus any lost PSE benefits, will be outweighed by what you’ll gain in tax saving"

If I take my pension and then pay most of my wage into an AVC but ensures I kept below the PSE threshold, would that work, IE be beneficial by paying minimum tax and also ensuring maximum pension contribution.

Thanks

[RobertT]

I don’t really know what to say that I didn’t say in my previous post!

1. Put as much into RM pensions to stay within PSE as that’s an extra saving on your NIC’s. The PSE booklet will give you all the info: http://www.myroyalmail.com/sites/defaul ... %20WEB.pdf" onclick="window.open(this.href);return false;
Plus there’s already a thread on RMC concerning the matter that might give you a few pointers: http://www.royalmailchat.co.uk/communit ... 27&t=76631" onclick="window.open(this.href);return false;

2. Then you could pay in the rest of your wages into a private pension on which you will gain tax relief.

3. Do your maths and work out whether it’s beneficial to do as you plan; or whether it’s actually better to leave your NRA60+NRA65 untouched for a few more years. You might find you’re actually losing more from your pension over your retirement, than you’re gaining from the tax you’re saving by putting all your wages into pensions for 2-3 years. But you will only know by working it out!