If I take my DBCBS at 60 will it be reduced by 25%

[RobertT]

Robert, Sorry I find this hard to follow, no critisim of you,

I feel the same, a few sentences and paragraphs would help!

it's just hard with all the pensions and forumlas!:
Apart from my DBCBS being used a little for the inflation part of the RMSPS which Royal Mail are responsible for.
1st question, you may not know the answer to this. I asked Lionel Sampson CWU RMPP trustee and he was not sure. But I am taking my DBCBS at 60 and I asked him, what was the reduction for taking 5 years early. He knew there would be a reduction, but was unsure of the amount. So I have calculated it for myself at 25% or 5% per year. Currently I have £5750 at April 19 and should ahve £5750 Apr 20 and pro rata for 10 months of this year (£5900 whole year) £4916 = £16416. I have taken 25% of that to = £12312. Do you think this sounds about right. (although I think a 25% reduction is a bit steep for 3 years of funding)

As far as I know there has been no formal announcement in the plan guide, website or associated literature about how much the DBCBS would be reduced by. But the part of the DBCBS that gets paid out along with NRA60 benefits(inflationary increases on RMSPS benefits) won't be reduced as long as you take them at age 60 with your NRA60.
But whatever the reduction is, 5% per year is probably as good a guess as any, I assume it'll be based on how long you're taking it before NRA, rather than how long you've paid in.

The main question I have is you state
"DBCBS funds 25% of RMPP benefits" I am on target to have (March 2019) £3748 pension and £11242 min lump and a max lump sum of £20,982 with £3148 pension (16% reduction for max lump sum) but with a 25% reduction for CSDB (NRA65) taking at 60, that becomes (minus 26% (5 years, 2 months early) and 16% for max lump sum = 42% reduction) a pension (csdb) of £2173 and a min lump sum of £6517 or max lump sum of £14,484. So here is my question with an asumption (taking out and ignoring the small bit for the RMPP inflation part of DBCBS) . It appears to me that if they take some of my DBCBS to negate the reduction in pension to pay the max lump sum of £14,414 , to keep my pension at £2733 (with only 26% reduction for 5 years early and no reduction for max lump sum) that they could use £8960 of my DBCBS to pay for it at a £16 to the £ conversion rate, leaving me with £3040 of out my £12000 DBCBS and a FS pension of approx £9773 with no reduction and min lump of £29,319 or £8209 (15% for max lump and 1% for 2 months early) with a max lump sum of £54,721. So Max lump sums FS £54,271 Csdb £14,414 and DBCBS of £12,000 reduced to £3000 to pay for no reduction in CSDB yearly pension (for taking the max lump sum) = total lump sums of £72,135 and combined FS and Csdb pensions (£8209 + £2773 = £10982)
That sure was long winded. But what I am asking is, will they use my DBCBS to pay for keeping my pension as it would have been without the 15% reduction for taking the max lump sum and if this is what you mean, will the conversion rate be around £16 to 1? I would be happy if is actually as the as the illustration booklet describes it is a "cash balance benefit" [and] "is payable [strictly] as a cash sum" and that I don't have to convert it to keep my pension at the rate it would have been without the 16% reduction for the max lump sum.
Thanks in advance. Stephen. Section B final salary, Csdb and DBCBS. current pensionable pay £28833 and Cash bal pensionable pay £29203 (march 2019)

When working out how much you're likely to get, the first thing to do is realise that benefits are paid out on a NRA60(up to 31 March 2010) and NRA65(from 1 April 2010 to 31 March 2018) basis, rather than the Final Salary(up to 31 March 2008) and CSDB(from 1 April 2008 to 31 March 2018) amounts you keep quoting.
Therefore your NRA60 amount will include the first 2 years of your CSDB benefits and your NRA65 will be the other 8 years of the CSDB.

The NRA65 tax free cash will first be funded using the standard lump sum you get for being a section B member, or the 'minimum lump sum' as you call it. Then your DBCBS money will be used to top up the lump sum to the maximum, assuming there's enough in the pot.

If there's not enough your pension will be reduced to fund that extra if you want the maximum lump sum possible. If there's any DBCBS cash left over, it can be taken as a taxable lump sum.

So assuming your DBCBS pot pays for your lump sum to be increased from the minimum amount to the maximum amount, you'll end up with a bigger annual pension amount, because you're not giving up any pension to get that lump sum. It's coming from the DBCBS instead.

[stephen500]

Robert, Sorry I find this hard to follow, no critisim of you,

I feel the same, a few sentences and paragraphs would help!

it's just hard with all the pensions and forumlas!:
Apart from my DBCBS being used a little for the inflation part of the RMSPS which Royal Mail are responsible for.
1st question, you may not know the answer to this. I asked Lionel Sampson CWU RMPP trustee and he was not sure. But I am taking my DBCBS at 60 and I asked him, what was the reduction for taking 5 years early. He knew there would be a reduction, but was unsure of the amount. So I have calculated it for myself at 25% or 5% per year. Currently I have £5750 at April 19 and should ahve £5750 Apr 20 and pro rata for 10 months of this year (£5900 whole year) £4916 = £16416. I have taken 25% of that to = £12312. Do you think this sounds about right. (although I think a 25% reduction is a bit steep for 3 years of funding)

As far as I know there has been no formal announcement in the plan guide, website or associated literature about how much the DBCBS would be reduced by. But the part of the DBCBS that gets paid out along with NRA60 benefits(inflationary increases on RMSPS benefits) won't be reduced as long as you take them at age 60 with your NRA60.
But whatever the reduction is, 5% per year is probably as good a guess as any, I assume it'll be based on how long you're taking it before NRA, rather than how long you've paid in.

The main question I have is you state
"DBCBS funds 25% of RMPP benefits" I am on target to have (March 2019) £3748 pension and £11242 min lump and a max lump sum of £20,982 with £3148 pension (16% reduction for max lump sum) but with a 25% reduction for CSDB (NRA65) taking at 60, that becomes (minus 26% (5 years, 2 months early) and 16% for max lump sum = 42% reduction) a pension (csdb) of £2173 and a min lump sum of £6517 or max lump sum of £14,484. So here is my question with an asumption (taking out and ignoring the small bit for the RMPP inflation part of DBCBS) . It appears to me that if they take some of my DBCBS to negate the reduction in pension to pay the max lump sum of £14,414 , to keep my pension at £2733 (with only 26% reduction for 5 years early and no reduction for max lump sum) that they could use £8960 of my DBCBS to pay for it at a £16 to the £ conversion rate, leaving me with £3040 of out my £12000 DBCBS and a FS pension of approx £9773 with no reduction and min lump of £29,319 or £8209 (15% for max lump and 1% for 2 months early) with a max lump sum of £54,721. So Max lump sums FS £54,271 Csdb £14,414 and DBCBS of £12,000 reduced to £3000 to pay for no reduction in CSDB yearly pension (for taking the max lump sum) = total lump sums of £72,135 and combined FS and Csdb pensions (£8209 + £2773 = £10982)
That sure was long winded. But what I am asking is, will they use my DBCBS to pay for keeping my pension as it would have been without the 15% reduction for taking the max lump sum and if this is what you mean, will the conversion rate be around £16 to 1? I would be happy if is actually as the as the illustration booklet describes it is a "cash balance benefit" [and] "is payable [strictly] as a cash sum" and that I don't have to convert it to keep my pension at the rate it would have been without the 16% reduction for the max lump sum.
Thanks in advance. Stephen. Section B final salary, Csdb and DBCBS. current pensionable pay £28833 and Cash bal pensionable pay £29203 (march 2019)

When working out how much you're likely to get, the first thing to do is realise that benefits are paid out on a NRA60(up to 31 March 2010) and NRA65(from 1 April 2010 to 31 March 2018) basis, rather than the Final Salary(up to 31 March 2008) and CSDB(from 1 April 2008 to 31 March 2018) amounts you keep quoting.
Therefore your NRA60 amount will include the first 2 years of your CSDB benefits and your NRA65 will be the other 8 years of the CSDB.

The NRA65 tax free cash will first be funded using the standard lump sum you get for being a section B member, or the 'minimum lump sum' as you call it. Then your DBCBS money will be used to top up the lump sum to the maximum, assuming there's enough in the pot.

If there's not enough your pension will be reduced to fund that extra if you want the maximum lump sum possible. If there's any DBCBS cash left over, it can be taken as a taxable lump sum.

So assuming your DBCBS pot pays for your lump sum to be increased from the minimum amount to the maximum amount, you'll end up with a bigger annual pension amount, because you're not giving up any pension to get that lump sum. It's coming from the DBCBS instead.

Thanks for your reply Robert. I have converted the DBCB scheme at £16 to £1 to make up that difference (which appears to be the difference between min and max for both pensions and lump sums)

[RobertT]

Thanks for your reply Robert. I have converted the DBCB scheme at £16 to £1 to make up that difference (which appears to be the difference between min and max for both pensions and lump sums)

The DBCBS is to fund some or all of the lump sum, with any excess being classed as taxable income, once the 25% tax free allowance has been used up.

You can't commute the DBCBS to more pension!

[stephen500]

Thanks for your reply Robert. I have converted the DBCB scheme at £16 to £1 to make up that difference (which appears to be the difference between min and max for both pensions and lump sums)

The DBCBS is to fund some or all of the lump sum, with any excess being classed as taxable income, once the 25% tax free allowance has been used up.

You can't commute the DBCBS to more pension!

I don't want to commute any of my DBCBS to any of my annual pension.
What I was presuming and am I wrong? That they may use as much of my DBCBS up as possible to, if possible reduce my loss of annual pension to take my max lump sum.
In other words, my annual pension is say £3748 with a min lump sum (Csdb scheme, section B) of £11242, giving a pot of £86202 and a max lump sum of £21,550 with a reduced pension of £3148 (minus 16% for max lump sum). So the difference between the max pension v reduced one is £3748 minus £3148 is £600. So I appear to lose £600 of my pension at a rate of £17.18 to ? to gain another £10308 ie to max lump sum
I am expecting to gain after perhaps a 25% loss for taking my DBCBS at 60, £12000 DBCBS. So what I am asking is will I get this lump sum as cash or will it be converted into pension to minimise the reduction of my yearly pension (Csdb section B) Ie will I lose £10,398 to gain back that £600 giving me my orignal £3748 and a DBCBS of £1602. (£12000 minus £10,398)
I don't want to do this, if I don't I would rather have the cash then be forced to have it converted back into my max yearly pension.

[stephen500]

Interesting I have never seen this before.
This implies "cash balance scheme" is paid as cash, with a reduction for taking early and 25% tax free.
So for me, if this is right it's. £16416 minus ( a guesss, 25% for 5 years early payment) = £12312. 25% being tax free £3078 and the rest taxed at my applicable rate, which for me should be 20%, so thats £2462 tax, leaving me with £9850 cash.

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[RobertT]

What I was presuming and am I wrong? That they may use as much of my DBCBS up as possible to, if possible reduce my loss of annual pension to take my max lump sum.

Yes, you've already been told that's how it works!

In practice the DBCBS will only make up a small part of your NRA60 lump sum because it is only attached to the inflationary increases of your RMSPS benefits from 2012 onwards. Therefore to get the maximum NRA60 lump sum you will have to give up some pension.

The remaining DBCBS cash is likely to fund most if not all of your NRA65 lump sum along with the standard amount you get as a section B member. With any excess DBCBS cash being classed as taxable income.

[RobertT]

Interesting I have never seen this before.
This implies "cash balance scheme" is paid as cash, with a reduction for taking early and 25% tax free.
So for me, if this is right it's. £16416 minus ( a guesss, 25% for 5 years early payment) = £12312. 25% being tax free £3078 and the rest taxed at my applicable rate, which for me should be 20%, so thats £2462 tax, leaving me with £9850 cash.

25.jpg

That's taken from the section F plan guide, so obviously doesn't apply to you.

[stephen500]

Interesting I have never seen this before.
This implies "cash balance scheme" is paid as cash, with a reduction for taking early and 25% tax free.
So for me, if this is right it's. £16416 minus ( a guesss, 25% for 5 years early payment) = £12312. 25% being tax free £3078 and the rest taxed at my applicable rate, which for me should be 20%, so thats £2462 tax, leaving me with £9850 cash.

25.jpg

That's taken from the section F plan guide, so obviously doesn't apply to you.

So in the end I was right, that the DBCBS replaces as far as possible the loss of pensionable pay to pay for the max lump sum.
That is what I meant when I talked about commute to "more pension". I did not mean more pension over and above the max yearly pension payable, just up to the original amount, sadly.
And sadly this appears to me, they, if this is true, get to swipe a lot of my DBCBS, which is actually what I did not want.
I wanted the cash to use as I want,as It is very expensive to replace the pensionable amount.
As far as my Csdb pension is concerned, as part of it is with the NRA60 pension (as you say) they don't get to swipe it all.
I also find it hard how to work out deductions for certain scenarios.
Ie I plan to take my NRA65 (provided the Corona Virus delay does not prevent me from doing so) at age 59 and 10 months. So I need to make certain deductions and I am not sure how to go about doing that.
Do I first deduct 20% from my NRA65 on the "illustration" and place it with the NRA60. (to 2010).
Next from the CSDB (2010 to 2018 from my illustration) Do I then deduct 26% for taking 5 years and 2 months early and then another 16% for taking the max lump sum?
Or do I just take 42% (26% and 15%) away in one lump sum.
Taking 26% away and then 16% away gives me more pension, than just taking away the 42% from the whole lump (I know it is maths, which is not my strong point)
I suppose in reality it is a moot point.
As if, the DBCBS is going to replace my max lump sum to keep my pension at the max, I don't need to deduct the 16% for max lump sum.
So it looks like I will get: (2019 illustration)
£9779 minus (16% max lump sum and 2 months early) = £8214 yearly section B FS pension and £754 from the Csdb scheme up to 2010 (minus 42% for max lump and taking it 5 years and 2 months early) £437. In total £8651 (combined NRA60 and 2 years of NRA65) + £54,755 FS lump sum combined with £2912 Csdb lump sum up to 2010. = £57667 (£54,755 + £2912)
Now for the Csdb 2010 to 2018.
Do I either (senario 1) £2998 (having taken away 20% to place in the NRA60 above) (2019 illustration) minus 26% to £2218 (for 5 years and 2 months early) and then another 16% for the max lump sum, taking it down to £1863? with either £5589 as the min lump sum or £12417 as the max lump sum.
Or do I (senario 2) take £2998 and deduct 42% in one calculation (26% and 16% combined) leaving me £1738 CSDB pension with the max lump sum of £11584.
Senario 1 means the difference between max and min lump sums is £6828, which I presume reduces my DBCBS from £12000 (having already deducted a presumed 25% for taking 5 years early)
to £5172 (possibly taxable depending on income)
or Senario 2 the difference between max and min lump sums is £4929, taking that from my DBCBS amount of £12000, leaving me with £7071.
So taking percentages away and in what order really does matter!
Any thoughts you have would be welcome. (I have tried above to deduct the 20% that goes from the NRA65 pot into the NRA60 pot as a seperate entities paid up to 2010)

[RobertT]

You seem to be looking at things in a very convoluted way, and a way that totally baffles me to be honest. Try doing this:

1. Work out your NRA60 figures – that's all FS pension & lump sum up to 2008 plus the first 2 years of CSDB(roughly 20% of your total CSDB figures).
2. Multiply the pension by 20 and add the standard lump sum to give your NRA60 pot value.
3. Subtract %age for taking it early.
4. 25% of that figure can be taken as tax free cash,
5. Divide the remainder by 20 to give yearly NRA60 pension.

As stated upthread a small amount of the DBCBS may be used to fund some NRA60 lump sum due to RM being responsible for paying post 2012 inflationary increases on RMSPS(pre 2012) benefits. That amount is going to be quite small, probably only a few hundred £'s, so in my opinion it's too difficult and probably not really worth trying to work it out.

6. Work out your NRA65 figures – that's all CSDB pension & lump sum from 2010 to 2018(the remaining 80% from 1 above), plus the DBCBS.
7. Multiply the pension by 20, add the standard lump sum & DBCBS to give your NRA65 pot value.
8. Subtract %age for taking it early(5% per year for the DBCBS is as good a guess as any).
9. 25% of that figure can be taken as tax free cash, but the DBCBS will only be attached to 75%(2012-2018) of that amount, which is where it gets tricky.
10. Once you've worked out how much DBCBS will be tax free, you'll also know how much will be taxed.
11. Divide the remainder of the reduced NRA65 pot value by 20 to get yearly NRA65 pension.

The above will only give you fairly rough ballpark figures, so if you want them to be exact i suggest the only option is to wait until you get your quote.

[stephen500]

Steph, I’ve just crunched the numbers the way I would work it out and come to....... now don’t bite my head off.....
Lump sum of £74,500.
Yearly pension of £11,180.
Monthly pension of £930.
When you get your pension estimate I would be fascinated to know how accurate the above is...... if only so I know I’m on the right lines to working it out for my own in about 4 years or whether it’s back to the drawing board.
Keep safe Stephie lad.

Right my head is done in trying to calculate figures.
I am going to take yours.
The only thing I don't know for sure, is how much tax I will pay on what is left of my dbcbs.
Have you worked the above figures out using my pensionable pay as on my 2019 illustration shown (ie full night allowance with PHG money included in that)
If you have , then I will take your figures as my head hurts too much to do any more!

[stephen500]

You seem to be looking at things in a very convoluted way, and a way that totally baffles me to be honest. Try doing this:

1. Work out your NRA60 figures – that's all FS pension & lump sum up to 2008 plus the first 2 years of CSDB(roughly 20% of your total CSDB figures).
2. Multiply the pension by 20 and add the standard lump sum to give your NRA60 pot value.
3. Subtract %age for taking it early.
4. 25% of that figure can be taken as tax free cash,
5. Divide the remainder by 20 to give yearly NRA60 pension.

As stated upthread a small amount of the DBCBS may be used to fund some NRA60 lump sum due to RM being responsible for paying post 2012 inflationary increases on RMSPS(pre 2012) benefits. That amount is going to be quite small, probably only a few hundred £'s, so in my opinion it's too difficult and probably not really worth trying to work it out.

6. Work out your NRA65 figures – that's all CSDB pension & lump sum from 2010 to 2018(the remaining 80% from 1 above), plus the DBCBS.
7. Multiply the pension by 20, add the standard lump sum & DBCBS to give your NRA65 pot value.
8. Subtract %age for taking it early(5% per year for the DBCBS is as good a guess as any).
9. 25% of that figure can be taken as tax free cash, but the DBCBS will only be attached to 75%(2012-2018) of that amount, which is where it gets tricky.
10. Once you've worked out how much DBCBS will be tax free, you'll also know how much will be taxed.
11. Divide the remainder of the reduced NRA65 pot value by 20 to get yearly NRA65 pension.

The above will only give you fairly rough ballpark figures, so if you want them to be exact i suggest the only option is to wait until you get your quote.

Thank you, Robert. I read this after I posted some thing to another kind fella, who was trying to help me out! as well as you.

[Steve_claret]

In practice the DBCBS will only make up a small part of your NRA60 lump sum because it is only attached to the inflationary increases of your RMSPS benefits from 2012 onwards. Therefore to get the maximum NRA60 lump sum you will have to give up some pension.

The remaining DBCBS cash is likely to fund most if not all of your NRA65 lump sum along with the standard amount you get as a section B member. With any excess DBCBS cash being classed as taxable income.

Hi Robert, I am section B also and I have just returned my RMPP NRA60 options and my current DBCBS fund paid £400 towards my RMPP age 60 tax-free cash. The remaining DBCBS fund which for me should currently be approx £11k will presumably be used to fund my NRA65 tax free cash but as I am currently still paying into the DBCBS then it may be worth more than 25% when I come to draw it. My post 2012 CSDB pension is only currently worth about £64k so 25% of this is only £16K so my question is if there is any remaining cash balance money left over then do we just take it as cash and therefore have to pay tax on it?

[RobertT]

Hi Robert, I am section B also and I have just returned my RMPP NRA60 options and my current DBCBS fund paid £400 towards my RMPP age 60 tax-free cash. The remaining DBCBS fund which for me should currently be approx £11k will presumably be used to fund my NRA65 tax free cash but as I am currently still paying into the DBCBS then it may be worth more than 25% when I come to draw it. My post 2012 CSDB pension is only currently worth about £64k so 25% of this is only £16K so my question is if there is any remaining cash balance money left over then do we just take it as cash and therefore have to pay tax on it?

Yes, once you've used up the DBCBS to fund your tax free cash, anything over can also be taken as a lump sum but will be classed as earned income and so potentially taxed under normal PAYE rules.
The amount of tax you actually pay will depend on how much your total earnings are in that particular financial year.

The Personal Tax Allowance is currently £12,500 per year(plus RM uniform cleaning allowance), so anything under that is tax free. Anything between £12,501 and £50,000 is taxed at 20% and anything over that is 40%.

In practice when people take their pensions, retire or change jobs their tax code can sometimes end up being incorrect due to having more than one income stream in the same year. So you can end up paying either too much or not enough tax. If that happens you will get a refund or have to refund HMRC, which is often done via a change in tax code.

[Steve_claret]

Thanks Robert. Hopefully if we only stay in the cash balance scheme for another year then there won't be too much money left over after the NRA65 lump sum has been funded. I don't really like paying additional tax but if it is unavoidable then so be it.

[stephen500]

Thanks Robert. Hopefully if we only stay in the cash balance scheme for another year then there won't be too much money left over after the NRA65 lump sum has been funded. I don't really like paying additional tax but if it is unavoidable then so be it.

According to Lionel Sampson (CWU RMPP trustee) he can't, if I remember what he said to me correctly, see us entering the CDC scheme till at least the end of 2021.
So my DBCBS is worth so far £5750 to April 2019, another £5750 till April 2020 and £5900 pro rata for this year £4916 (ten months till Oct 20) giving me £16416.
As I will be taking it 5 years and 2 months early, I know there will be a reduction and I am guessing it will be 5% per year, so I will, with my guess lose 26% making it £12147.
My taxable pay last year was £37000.
If I earn the same pro rata this year it will be £30833.
Plus 4 months of pension in total of £3696. (I am leaving work in Dec 2020)
= as far as I can see £34529 taxable income for the year, leaving me with £15471 to play with, where I only pay 20% on what's left of the rest of my DBCBS scheme money.
I work nights with full night allowance and do a reasonable amount of docket, but I still can't see me slipping into the 40% tax bracket for the rest of my DBCBS money.
I am hoping I will only pay around £600 tax on it at best! here is hoping!