Cash balance scheme

[TheStrangler]

Am I right in assuming that the 25% max lump sum you can take from nra60 and 65 means that whatever your cash sum from the current scheme is (from April 2018), its subject to tax at 20%?), the alternative being that its used to boost up the lower monthly pension?
So to sum up its a bit less attractive to take as a lump sum?

[deltaforce]

Surely you can use the cash balance scheme. To fund your lump sum and the lump sum from previous pension scheme could be used to get bigger pension amount.

[hatter68]

I took a lump sum from cash balance scheme when I turned 60 or I could have deferred it until I turned 65

[TheStrangler]

Surely you can use the cash balance scheme. To fund your lump sum and the lump sum from previous pension scheme could be used to get bigger pension amount.

Does that make any difference if you use the cash from the cb scheme or from pension lump sum to increase the monthly pension?
Trying to understand the difference of doing it this way (I'm sure there is a logic to it and I'm just not getting it!)

[RobertT]

Am I right in assuming that the 25% max lump sum you can take from nra60 and 65 means that whatever your cash sum from the current scheme is (from April 2018), its subject to tax at 20%?), the alternative being that its used to boost up the lower monthly pension?
So to sum up its a bit less attractive to take as a lump sum?

The Cash Balance scheme(DBCBS) provides a lump sum to take predominantly with your NRA65 benefits, and specifically your 2012-2018 benefits. There is no option to convert any of it into more RM pension!

If the DBCBS equals more than 25% of your 2012-2018 pot, the rest will be payable as a taxable lump sum, and taxed under normal PAYE rules..

[stephen500]

Am I right in assuming that the 25% max lump sum you can take from nra60 and 65 means that whatever your cash sum from the current scheme is (from April 2018), its subject to tax at 20%?), the alternative being that its used to boost up the lower monthly pension?
So to sum up its a bit less attractive to take as a lump sum?

You have a few options.
But looking at what you are talking about.
In the main the DBCBS scheme is used to offset pension income loss for your NRA65, with a little used for your NRA60.
Normally, if you are section B (I don't know about section C)
You can take a max lump sum and to pay for it, you reduce your pension by about 15%.
Now the DBCBS will be used, if you choose this option, to keep that reduction to nil, if possible.
They will use as much of your DBCBS as possible to take you up to the max 25% tax free lump sum.
Any left over is described as your EXCESS DBCBS and I think all of this is subject to tax at your given rate.
However that EXCESS money, may not be a great deal of money. Mine is just over £3000 and I will pay tax of around £600.
Below is some workings out I did for my pension, to give you an Idea.
Btw you are right. Incorporating it into your tax free lump sum appears the most tax efficent way of using your DBCBS scheme, as one of the options given is to give up your min lump sum and have a very small increase in your yearly pension, to take all of your DBCBS tax free. In other words I would give up about £6746 lump sum to gain a couple of hundred pounds yearly pension.
I would have to live 30 years to make up the loss of the min lump sum.
To me 2A of NRA65 "options" appears the most efficent use of my DBCBS scheme (tax wise.)
NB The size of your excess DBCBS will depend in part as to how long this DBCBS carries on for.
My Excess DBCBS sum is not so big, because I expect to lose 25% of it as I am taking it five years early and I am taking it in Dec this year.
However if this DBCBS scheme was to drag on for a while, your DBCBS pot would grow larger and I am guessing would leave more in your Excess DBCBS pot and leave more subject to tax.
Remember no one on this forum can give financial advice, this is just the opinion of a lay person!

dbcbs.jpg

[stephen500]

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[stephen500]

Surely you can use the cash balance scheme. To fund your lump sum and the lump sum from previous pension scheme could be used to get bigger pension amount.

You can't get a bigger pension amount, but you can, if you have enough in your DBCBS, reduce the reduction in your NRA65 pension to zero if possible (Section B) to faciltate having a max lump sum.
Ie taking the max lump sum, normally means giving up around 15% of your pension.
What now happens is you have your min lump sum and have the DBCBS make your lump sum (if possible) up to the max lump sum, whilst seeing (if possible) no reduction in your pension to take the max 25% tax free lump sum. Any excess DBCBS monies left over, will be taxed at your taxable rate.
The size of your excess DBCBS will depend in part as to how long this DBCBS carries on for.
My Excess DBCBS sum is not so big, because I expect to lose 25% of it as I am taking it five years early and I am taking it in Dec this year.
However if this DBCBS scheme was to drag on for a while, your DBCBS pot would grow larger and I am guessing would leave more in your Excess DBCBS pot and leave more subject to tax.
This is not financial advice, just the opinion of a lay person.
Here is an example of my pension workings out.
My later NRA65 has been reduced by 20% or two years here as it is included in my NRA60 in the seperate collumn below (other wise known as NRA60 (2008-10) )

dbcbs.jpg

[TheStrangler]

Thanks to all above who've replied and thanks Stephen for the effort of including your workings out.
My plan is similar to yours Stephen in so much as I want to use any lump sum divided up into number of years (9) till state pension to top up my monthly rm pension.
The max lump sum is a no brainer for me based on the above rather than breaking even with the max pension in 21 years or so.
State pension and rm pension should suffice from that point.
The current scheme got me confused as I thought it was simply a type of savings scheme (in effect) you paid into and when it came to cashing in it was either a sum of money minus tax (probably) or top up for the minimum monthly pension.
I think the lady at rm pensions said most people use it to top up the monthly pension and she also mentioned the word "crystalise"?
I'll post the numbers on here when I get them. Realise of course these are opinions not financial advice but very much value your opinions.

[stephen500]

Thanks to all above who've replied and thanks Stephen for the effort of including your workings out.
My plan is similar to yours Stephen in so much as I want to use any lump sum divided up into number of years (9) till state pension to top up my monthly rm pension.
The max lump sum is a no brainer for me based on the above rather than breaking even with the max pension in 21 years or so.
State pension and rm pension should suffice from that point.
The current scheme got me confused as I thought it was simply a type of savings scheme (in effect) you paid into and when it came to cashing in it was either a sum of money minus tax (probably) or top up for the minimum monthly pension.
I think the lady at rm pensions said most people use it to top up the monthly pension and she also mentioned the word "crystalise"?
I'll post the numbers on here when I get them. Realise of course these are opinions not financial advice but very much value your opinions.

I have an idea what the word "crystalise" means pension wise, but Robert T will know what it means.
If my figures are correct I will have about £20k a year to live on till 66 and 10 months. With around £11,200 pension and the rest of the £20k made out of my LS each year.
That should leave me with a little left of my LS for a couple of small things and family treats.
I just hope this Covid lifts within the next year, or I will be stuck in my home with money and nothing to spend it on or any where to go too! That would suck.

[renrag40]

Hi Stephen, when your mates showed you their pension quotes was their cash balance (post April 2018 ) total reduced? The reason I'm asking is that on another thread someone said they had been told, when they inquired about it , that it is not reduced if you take it before your NRA 65 date because it is effectively classed as a DC pension. I hope I'm not misunderstanding the post on that thread. Also, one of the lads where I work took all his pensions aged 55 in February 2019 and his cash balance figure was not reduced. His figure was around £3700 which was about right for just over 10 months of contributions.

[stephen500]

Hi Stephen, when your mates showed you their pension quotes was their cash balance (post April 2018 ) total reduced? The reason I'm asking is that on another thread someone said they had been told, when they inquired about it , that it is not reduced if you take it before your NRA 65 date because it is effectively classed as a DC pension. I hope I'm not misunderstanding the post on that thread. Also, one of the lads where I work took all his pensions aged 55 in February 2019 and his cash balance figure was not reduced. His figure was around £3700 which was about right for just over 10 months of contributions.

my friend at work is taking is NRA65 on his birthday, so his pension is not reduced at all. I am taking mine at 59 and 10 months. I spoke to Lionel Sampson Trustee of RMPP who was of the opinion the DBCBS would be reduced for taking it early , but he did not know by how much and the pension people thought the same. I factored in for myself a reduction of 25% for five years early payment, but would be very happy to be told that is wrong and be a lot better off! But be careful not to choose option 3B which is pension increased by a little with no standard lump sum and DBCBS totally tax free. But it costs you thousands in a loss of your standard lump sum, which would require you living 30 years to make up your lost standard lump sum in pension payments

[renrag40]

The bloke in work had only paid into the interim cash scheme from April 2018 until February 2019 and took his pension at 55. He was in Section C and was receiving late shift allowance. So to get over £3500 would suggest no reduction. Hopefully yours will not be reduced. We will know when you get you quote. Fingers crossed for you Stephie.

[stephen500]

The bloke in work had only paid into the interim cash scheme from April 2018 until February 2019 and took his pension at 55. He was in Section C and was receiving late shift allowance. So to get over £3500 would suggest no reduction. Hopefully yours will not be reduced. We will know when you get you quote. Fingers crossed for you Stephie.

So he would have been section F which is different to us. Both of us are part of RMPP but we are section B or C. See RMPP site for section F for details of that, I think, stand alone DBCBS scheme.i think he would have got 25% tax free and yes prob no reduction. So as section B I think my DBCBS fund will be reduced for taking early and that is included in the calculations

[renrag40]

No Stephen. He had 20 years service at the time and was definitely in Section C. My point was that the interim fund was only in operation for a duration of just over 10 months at the time that he took his pension aged 55. His cash pot was over £3500 which would have been pretty much spot on for his and RMs contributions for just over 10 months. So it appears that he did not have his cash pot reduced. I hope this happens for you ...... and me if I can hold out for another 4 years.......