Pension

[RobertT]

It's an IFA's job to advise what is best for their clients, and based on averages it's best to take your pension at NRA! As an example:

Postie A has a NRA60 pension of £100 per week at 60 but decides to take it at 55 and so gets £75 per week instead. Assuming he doesn't pay any income tax on it and not including any inflationary increases:

By the time he's 60 he'll have received £19,500.
By 65 = £39,000
By 70 = £58,500
By 75 = £78,000
By 80 = £97,500
By 85 = £117,000

But had he paid tax on it between 55 and 65, then the figures would be as follows:

By 60 = £15,600
By 65 = £31,200
By 70 = £50,700
By 75 = £70,200
By 80 = £89,700
By 85 = £109,000

Postie B also has an NRA60 of £100 per week and takes it at 60 and pays no income tax:

By 60 = £0
By 65 = £26,000
By 70 = £52,000
By 75 = £78,000
By 80 = £104,000
By 85 = £130,000

If he paid tax on it up to 65, then the figures would be:

By 60 = £0
By 65 =£20,800
By 70 = £46,800
By 75 = £72,800
By 80 = £98,800
By 85 = £124,800

So the break even level would be age 75. If you live longer than that, then taking it at NRA would give you the better overall outcome!

* In practice everyone's tax situation will depend on their own circumstances, the above is just an example of what might happen, and does not include taking a tax free lump sum.

So the choice to take your pension early could have a significant impact on the total money you receive while drawing it. Whether you lose or gain is ultimately dependent on how long you live, which is one variable that nobody really knows.

The decision to stay in the scheme and pay into the DBCBS would mean a bigger lump sum should you choose to take one(section C) and also a bigger pension. It's in addition to what you've already accrued - not instead of it!

[daveyeff]

not a great deal of difference there after all those years. if you do live into your late 70s early 80s, then I doubt most people will care or even know how much the difference is. and even if you do know, then chances are you will be using it to pay for the care you will probably be receiving from the care home you are in. God forbid. at least having it younger in life you will remember what you spent it on and enjoyed it while you were young enough. one guy at our office paid his mortgage of with his lump sum saving him thousands of pounds in interest. but hey,...its to each their own.!!

[NorthernBoy]

Up until about 6 months ago, I was planning on taking my pensions at age 55 (am a deferred pension plan c member), however I have now come full circle and am going to take them at the normal NRA 60 age.

I want to take the maximum lump sum possible and I had not realised how much the lump sum would be reduced. For plan c members every £100 reduction in total pension, would mean a potential reduction in lump sum of £500 (20x £100 x 25%). I also have an avc fund as well, so the extra 5 years should allow it to grow more and give me more lump sum.

I would still like to retire at 55 and as such I am trying to put as much into a DC scheme as possible. My aim is to have 100k at 55, take 25% tax free and then draw down the rest virtually tax free. This should give me nearly 20k net per year. I would then draw my RM nra 60 and 65 pensions at age 60. (would take a reduction on the nra 65 pension but the amount is minimal)

As has been said earlier, there is no one size fits all here as for when to take your pension and I can see for some people that taking at 55 is worth doing. All I would say is give it some serious thought, before deciding when to take your pensions.

[RobertT]

not a great deal of difference there after all those years. if you do live into your late 70s early 80s, then I doubt most people will care or even know how much the difference is. and even if you do know, then chances are you will be using it to pay for the care you will probably be receiving from the care home you are in. God forbid. at least having it younger in life you will remember what you spent it on and enjoyed it while you were young enough. one guy at our office paid his mortgage of with his lump sum saving him thousands of pounds in interest. but hey,...its to each their own.!!

I read somewhere once that only about 5% of people actually end up in a care home, many are actually quite independent well into their later years.
My parents are in their 80's, they have obviously slowed down but they still live in their own home, still have their faculties and my dad even does a bit of buying and selling on ebay to fill a bit of time – at the age of 88!

Everybody is different, but don't underestimate how long you might live and how much money you'll need.

Using your tax free lump sum to pay the mortgage off is a very good thing to do. I plan to use some of mine(from AVC's) to help fund a house move!

[RobertT]

I would still like to retire at 55 and as such I am trying to put as much into a DC scheme as possible. My aim is to have 100k at 55, take 25% tax free and then draw down the rest virtually tax free. This should give me nearly 20k net per year. I would then draw my RM nra 60 and 65 pensions at age 60. (would take a reduction on the nra 65 pension but the amount is minimal)

That pretty much mirrors my plans, although I plan to leave my NRA65 until 65.

[daveyeff]

as I said, to each their own. there are thousands who have taken theirs at 55 with no regrets.

[NorthernBoy]

Robert, question for you.

If I take my NRA 65 pension at age 60 along with my NRA 60 pension, is the max lump sump worked out on the combined value of the two pensions or just on the NRA 60?

Example

Say NRA 60 pension is 10k and NRA 65 is 1k (after 25% reduction for taking at 60), max pension is 11k. X 20 = 220k, max lump sum is 55k, or would it be 25% of the 200k for nra 60?

Thanks

[RobertT]

Robert, question for you.

If I take my NRA 65 pension at age 60 along with my NRA 60 pension, is the max lump sump worked out on the combined value of the two pensions or just on the NRA 60?

Example

Say NRA 60 pension is 10k and NRA 65 is 1k (after 25% reduction for taking at 60), max pension is 11k. X 20 = 220k, max lump sum is 55k, or would it be 25% of the 200k for nra 60?

Thanks

It's worked out on the combined value.

[Driver74]

I’ve seen lots of people take all their pension at 55 but they are never the ones that retire at 60 simply because they aren’t getting enough to live on some spend their lump sum on cars holidays etc that’s their choice but if you want to retire at a decent age taking your pension early isn’t a good idea

[Navalron]

It's the pension contributions from RM that you lose which, compared to most other companies, especially private are generous. Most others pay about 4/6% of salary. I'm not to bad as got small forces pension, small RM pension and DWP pension, which combined should make me ok. Oh I got one from Hoover as I started with them years ago but they closed down the Glasgow site 9 months later. It was a DB scheme and latest figures is £1006 per year and £4,200 lump sum. Jesus, I hardly had time at Hoover to have a dump but I'm not complaining. They are another company who's pension scheme is going into the protection scheme, so I will only get 90%.

[baldrick]

Oh I got one from Hoover as I started with them years ago but they closed down the Glasgow site 9 months later. It was a DB scheme and latest figures is £1006 per year and £4,200 lump sum. Jesus, I hardly had time at Hoover to have a dump but I'm not complaining.

Not all pension schemes are that good. I worked for General Motors for about a year, in a car parts factory which is now closed. When I reached pensionable age the I was offered about £3.60 a year in pension, or a lump sum of about £35 iirc, which I took.

[Fatboyslim]

Horses for courses I’m afraid.

I took VR at 54. I pop in here now and again to see how things are going...been left 2 years now.

Full VR years. Pension at 55. The lot. 60/65. 35 years 700pm 55k lump sum. Missus gets slightly higher. Couldn’t do it without her.

I’m trying (without success) to convince missus to buy a place in the sun. Most of VR/LS sat in bank. Just sat there.

Personally if you are gonna retire early take £££. Not if carrying on working. Tax man will love you.

Me? I took full lot as I factored in losses. Plus money coming in. My worry was further changes is legislation. Plus. I did shifts for years - I do not know what toll it has taken.

Good luck everyone.

[TheTrolleyMan]

Robert T knows nothing about my finances but the big thing is this .......RM pensions will only get smaller & smaller in the future . I now have CONTROL of MY money and I'd rather trust the bank than the trustees / cwu in administering the RM Pension Scheme

[RobertT]

Robert T knows nothing about my finances but the big thing is this .......RM pensions will only get smaller & smaller in the future . I now have CONTROL of MY money and I'd rather trust the bank than the trustees / cwu in administering the RM Pension Scheme

I never suggested I knew anything about your finances, but I can do simple maths! And that maths says most people are better off, over the longer term, leaving their pensions until NRA.

If you choose to do something else, that is obviously up to you! Infact it probably makes everyone elses pensions that little bit more secure.

[TheTrolleyMan]

You trust a bank ?????

Everytime over RM Pensions and i'm government protected on my capital sum unlike The RM Status Quo Scheme that'll go ... ...Down .... Down ...