Retire at 55

[freespeech]

I’ve confused myself now reading some of the literature we have had over the years. I’m a section C current employee. Is it possible to leave the business at 55 and take ALL of your NRA60 and 65 benefits leaving not a penny behind?

Additionally if I was to go at 55 but not take everything until 56 would would I “lose” in pension terms compared to remaining in employment? I know the obvious is a years service and a pay rise but I was thinking more about something that I may lose that you can only get on initially leaving g rather than a year later.

[RobertT]

I’ve confused myself now reading some of the literature we have had over the years. I’m a section C current employee. Is it possible to leave the business at 55 and take ALL of your NRA60 and 65 benefits leaving not a penny behind?

Yes.

Additionally if I was to go at 55 but not take everything until 56 would would I “lose” in pension terms compared to remaining in employment? I know the obvious is a years service and a pay rise but I was thinking more about something that I may lose that you can only get on initially leaving g rather than a year later.

We obviously stopped accruing final salary pension in 2008 and CSDB pension in 2018, so an extra years service would currently get an extra years worth of DBCBS lump sum to take with your RMPP(post 2012) benefits.

Pay rises aren't guaranteed and our pensions aren't linked to them anymore anyway, unless you get a promotion.

If you stayed in RM employment your section C pension would be increasing by RPI. If you leave and not take it, it will be increasing by CPI, which is lower.
It'll increase by RPI in payment.

If you take your pension early it will obviously be paid out for longer which is a short term monetary gain. But factor in the early payment reductions and the extra income tax you pay if you're still working, it'll mean long term financial pain. You'll get both a higher income and more over all, based on average life expectancy by taking your pension at NRA.

You'll lose another year of your life to RM.

[Janet Brum]

I am very confused too, I don`t understand all this pension rules :(

Let`s just say I take my section C at 55, I will lose half of my pot (5% per year) if I take it at 55?

Or it`s 5% per year deducted after I take my tax free 25% lump sum?

Thank you RobertT :)

[RobertT]

If you take your pension early your pot value will be reduced by 5% per year and the 2 elements of your pension(NRA60 & NRA65) will have their own separate pot value.

So for example:

Your NRA60 benefits at 60 are worth £6,000 pension + no lump sum, or £4,500 pension + £30,000 max lump sum – using the usual 20x multiple, that would give a pot value of £120,000.

If you decide to take it at 55 your pot value would be reduced by 25% for taking it at 55 giving you £90k.
That in turn would provide a £4,500 pension + no lump sum, or £3,375 pension + £22,500 max lump sum.

A similar calculation is needed with your NRA65 but if you take that at 55 it will mean a 50% reduction for taking it 10 years yearly. Also bear in mind that the DBCBS will provide most if not all of your NRA65 lump sum, so the pension itself may not be reduced at all.

More info can be found on page 12 of the plan guide: https://www.royalmailpensionplan.co.uk/ ... ages_0.pdf" onclick="window.open(this.href);return false;

[NorthernBoy]

The general advice is to try and leave your pension until the normal retirement age so as to avoid a x% reduction. However there is no one rule fits all for this and for a number of people taking it earlier may suit their circumstances better. There have been numerous threads on here about the pros and cons of taking early. Many people on here have taken early and are happy with that decision.

I was all set for taking it at 55, but have now changed my plan to take at 60 or as close to as possible. I intend to draw money from a separate Dc pension scheme to help fund my earlier retirement plans.

Think very carefully about your decision.

A good idea is to think about what amount of money you will need in retirement (your number) and work back from there.

For example say “my number” is £20000 a year it could be broken down as follows

State pension 9k
RM pension. 7k
Rental from property 4K

Think about how much you will need if retiring and look at your RM pension to see how that fits into your plan.

[stephen500]

I’ve confused myself now reading some of the literature we have had over the years. I’m a section C current employee. Is it possible to leave the business at 55 and take ALL of your NRA60 and 65 benefits leaving not a penny behind?

Additionally if I was to go at 55 but not take everything until 56 would would I “lose” in pension terms compared to remaining in employment? I know the obvious is a years service and a pay rise but I was thinking more about something that I may lose that you can only get on initially leaving g rather than a year later.

There are two seperate processes, if you take your pension either in employment with RM or after you have left,
If you take it just before you leave (like me) You go through RMPP to get the ball rolling and then receive communication from RMPP and some from Capita.
But you must not resign until after your first pension payment has been made.
If you do resign before this, the whole process stops and you must reapply seperatly to both Capita and RMSPS.
If you did not take your pension till 56, but left at 55, you would save losing 5%, but would not gain another year DBCBS, as you wouldn't be paying into that any more, but would save on a years reduction.
Personally I think one year is neither here or there for your yearly pension, although it will affect your lump sum more.
I am leaving at near 60 and taking it all and plan to have my pension and divide some of my lump sum by 6 years to give me extra income, until my state pension kicks in.
My unknown is inflation.

[Janet Brum]

Thank you all for your answers and apologies to freespech for hijacking his topic :)

I`m still none the wiser, one more question please.
Lets say I`m 55 with a £ 90.000 pot in Rmdcp.

If I retire now, I can have 25% tax free, wich is £22.500.
I`ll be left with £ 67.500 in my pot.

From £67.500, I will lose 5% per year until I`m 65? Meaning I will lose half of it?

Or just 25% until I`m 60?

What`s going to happen between 60 and 65?

Still confused, I`ve read everything there is about this pension and I`m still dumb

[stephen500]

Thank you all for your answers and apologies to freespech for hijacking his topic :)

I`m still none the wiser, one more question please.
Lets say I`m 55 with a £ 90.000 pot in Rmdcp.

If I retire now, I can have 25% tax free, wich is £22.500.
I`ll be left with £ 67.500 in my pot.

From £67.500, I will lose 5% per year until I`m 65? Meaning I will lose half of it?

Or just 25% until I`m 60?

What`s going to happen between 60 and 65?

Still confused, I`ve read everything there is about this pension and I`m still dumb

I am afraid I cannot answer questions on your type of pension as it is different to the one I have. Ask Robert T and hopefully he can help. Sorry

[stephen500]

Thank you all for your answers and apologies to freespech for hijacking his topic :)

I`m still none the wiser, one more question please.
Lets say I`m 55 with a £ 90.000 pot in Rmdcp.

If I retire now, I can have 25% tax free, wich is £22.500.
I`ll be left with £ 67.500 in my pot.

From £67.500, I will lose 5% per year until I`m 65? Meaning I will lose half of it?

Or just 25% until I`m 60?

What`s going to happen between 60 and 65?

Still confused, I`ve read everything there is about this pension and I`m still dumb

I am afraid I cannot answer questions on your type of pension as it is different to the one I have. Ask Robert T and hopefully he can help. Sorry

[RobertT]

Thank you all for your answers and apologies to freespech for hijacking his topic :)

I`m still none the wiser, one more question please.
Lets say I`m 55 with a £ 90.000 pot in Rmdcp.

If I retire now, I can have 25% tax free, wich is £22.500.
I`ll be left with £ 67.500 in my pot.

From £67.500, I will lose 5% per year until I`m 65? Meaning I will lose half of it?

Or just 25% until I`m 60?

What`s going to happen between 60 and 65?

Still confused, I`ve read everything there is about this pension and I`m still dumb

Oh, you're in the RMDCP? That's totally different!
You have a pot of money which you can access any time after age 55 with the first 25% being tax free.

With the remainder you have different options, this link will give you more info: https://www.moneyadviceservice.org.uk/e ... on-schemes" onclick="window.open(this.href);return false;

There's no reductions for taking it before 60 or 65, it's worth whatever it's worth.

[Janet Brum]

Ah, finally I got it, thank you Robert :)

[freespeech]

Thank you all for your answers and apologies to freespech for hijacking his topic :)

I`m still none the wiser, one more question please.
Lets say I`m 55 with a £ 90.000 pot in Rmdcp.

If I retire now, I can have 25% tax free, wich is £22.500.
I`ll be left with £ 67.500 in my pot.

From £67.500, I will lose 5% per year until I`m 65? Meaning I will lose half of it?

Or just 25% until I`m 60?

What`s going to happen between 60 and 65?

Still confused, I`ve read everything there is about this pension and I`m still dumb

Oh, you're in the RMDCP? That's totally different!
You have a pot of money which you can access any time after age 55 with the first 25% being tax free.

With the remainder you have different options, this link will give you more info: https://www.moneyadviceservice.org.uk/e ... on-schemes" onclick="window.open(this.href);return false;

There's no reductions for taking it before 60 or 65, it's worth whatever it's worth.

Thats confused me then as a section C member.......so why is my "pot" of the DBCBS not "worth what it's worth"? If I've already paid 6% and the business 13.6% each year why does that get reduced if taken early?

[renrag40]

Because it is classed as a Defined Benefit pension even though it is only a pot cash designed to cover the cost of the tax free lump sum for years 2012-18 of the career average scheme. Useful for people in Section C, less so for Section B members. If you are in a Defined Benefit scheme and you take your entitlements before the nra then what you receive is reduced. I don’t know of any DB scheme that allows early redemption without penalties.
Stephen500 has had 2 different answers from 2 people at RMPP about the penalties for early redemption of the DBCBS ranging from well under 1% per year to 5% per year. It doesn’t instil confidence in the RMPP if they cannot appear to sing from the same hymn sheet about something like this.
The plus side of the interim fund is that it paid a surprisingly (to me anyway) healthy 3.7% on the first years contributions.... this equates to 7.4% APR as the contributions were paid in weekly.

[RobertT]

The idea of a DB scheme is that the pension you receive is defined by how much you earn and your length of service. They generally have a set NRA(RM have 2) with any decision to take them early resulting in a reduction.

I do know of one exception, which is the Local Government Pension Scheme. They have the 85 year rule, which allows some members to take their benefits from 60 unreduced if their age and length of service add up to 85+. Their NRA increased to state pension age for benefits accrued from 2014.

The DBCBS is just a pot of money but it's guaranteed to be worth at least as much as the money going in, with the addition of discretionary annual 'bonuses', which are also guaranteed once added. And is also DB with a set NRA of 65, so I think it's reasonable some kind of reduction will also happen. Although it's unclear exactly how much.

I agree with renrag40 that the 3.7% increase was quite high, especially as according to RM's accounts there's currently not enough money in the pot to pay for everyone's lump sums. But apparently it's not in deficit.

What we can do with RMSPS/RMPP benefits are governed by the rules of the scheme/s.

A DC pension is a little different because although it's still just a pot of money, it's value can fluctuate up and down along with its investments. The contributions going in are defined instead of what you might get at retirement.

Access to DC pensions is governed by law rather than the sponsoring employer and they don't normally have NRA's other than the legal minimum age you can access them(currently 55). But exceptions might be where there is a guaranteed annuity rate.

[stephen500]

The idea of a DB scheme is that the pension you receive is defined by how much you earn and your length of service. They generally have a set NRA(RM have 2) with any decision to take them early resulting in a reduction.

I do know of one exception, which is the Local Government Pension Scheme. They have the 85 year rule, which allows some members to take their benefits from 60 unreduced if their age and length of service add up to 85+. Their NRA increased to state pension age for benefits accrued from 2014.

The DBCBS is just a pot of money but it's guaranteed to be worth at least as much as the money going in, with the addition of discretionary annual 'bonuses', which are also guaranteed once added. And is also DB with a set NRA of 65, so I think it's reasonable some kind of reduction will also happen. Although it's unclear exactly how much.

I agree with renrag40 that the 3.7% increase was quite high, especially as according to RM's accounts there's currently not enough money in the pot to pay for everyone's lump sums. But apparently it's not in deficit.

What we can do with RMSPS/RMPP benefits are governed by the rules of the scheme/s.

A DC pension is a little different because although it's still just a pot of money, it's value can fluctuate up and down along with its investments. The contributions going in are defined instead of what you might get at retirement.

Access to DC pensions is governed by law rather than the sponsoring employer and they don't normally have NRA's other than the legal minimum age you can access them(currently 55). But exceptions might be where there is a guaranteed annuity rate.

This is just a guess, Robert T, but here goes. I think that deficit's have to be addressed on a tri annual basis and I think the next one for RM is 2021.
Then I presume Rm have to come up with a recovery plan to get it back on track.
If they can get the CDC scheme in for 2021, then the deficit of the DBCBS (which I presume is not a deficit until a tri annual reveiew is held) may not be that great over "the" period of recovery, which I am guessing is 3 years till the next review?