Couple of Questions Please

[heapsy]

If I am able to retire at 55 but don't draw my pension till, 60 and 65 for the respective sections so far, do I still take a massive % cut in pension (50 odd %) I think.

If you take any of your RMPP early it would be reduced by 5% per year. If you take it at the Normal Retirement Ages of 60 & 65, it won’t be reduced.

You will be able to take your new DC pot anytime after 55. There will be no reductions as such but the less time you pay into it, the less it's likely to be worth.

It was my understanding that the new DC scheme has an NRA of 65. Therefore surely it will be reduced? I cannot see Royal Mail and or Zurich allowing you to take it at 55 without a reduction as this would be counter productive. The later NRA is all about deferring payments.

[RobertT]

It was my understanding that the new DC scheme has an NRA of 65. Therefore surely it will be reduced? I cannot see Royal Mail and or Zurich allowing you to take it at 55 without a reduction as this would be counter productive. The later NRA is all about deferring payments.

A DC pension is just a pot of money which you can do a number of things with from 55 onwards.

If you were to buy an annuity then the younger you do that, the smaller your income is likely to be, but the monetary value of your DC pot will not be reduced. You just won’t be able to buy as much income as you would have done had you purchased your annuity later.

Equally if you choose to go down the drawdown route, the younger you start dipping into your pot, the sooner it’s likely to run out.

This is a guide to how DC pension schemes work: http://www.which.co.uk/money/pensions-a ... se-schemes" onclick="window.open(this.href);return false;

The article also gives a possible clue as to what a new DC section of the RMPP might look like:

Trust-based schemes

These types of pension schemes are run by a board of trustees that oversees the management and investments in your pension. The trustees choose the professionals who look after your money and have a duty to you as the member of the scheme to get the best deal on your behalf.

[therailway]

All the DC is, is a pot of money made up of contributions made by RM, yourself and the tax advantage from HMRC. So, as an over simplified example if the total contributions amount to £2000 per year, after being a member for 5 years the pot is £10000. If you choose to take this at the age of 55 the value is £10000. Alternatively if you choose to take it at retirement age of 65 the pot grows by £2000 per year ie another £20000, so on retiring the value is £30000. I am sure Robert will explain it in a better manner.

[yellowbelly]

All the DC is, is a pot of money made up of contributions made by RM, yourself and the tax advantage from HMRC. So, as an over simplified example if the total contributions amount to £2000 per year, after being a member for 5 years the pot is £10000. If you choose to take this at the age of 55 the value is £10000. Alternatively if you choose to take it at retirement age of 65 the pot grows by £2000 per year ie another £20000, so on retiring the value is £30000. I am sure Robert will explain it in a better manner.

Value at any point also depends on the increase (or decrease!!) of the investments the pension contributions are invested in......