Breaking - RMPP RMSPS - update on tax- 18 1st June application for winter payment 2020, diary time line

[freespeech]

Thanks Stephen - I got my DBCBS fund paid in full, the Excess arises from unintentionally overfunding my Bonusplan and Flexiplans AVC’s due to the introduction of the DBCBS. I am 9 weeks into the 12 week revision process so around 3 weeks to wait!

I'm thinking of increasing my AVC's......what do you mean by "unintentionally overfunding my Bonusplan and Flexiplan AVC's"?

The value of his DBCBS fund, Flexiplan and Bonusplan combined is over 25% of his NRA65 pot value.
That overfunding was due to the DBCBS being introduced.

Both the DBCBS and AVC's fund the tax free lump sum when taking your pension benefits.

Sorry for answering someone else's question.

Thanks.....I suspect mine will be the same. So is it better to continue to pay AVC's given the tax and RM support or to stop?

[RobertT]

Thanks Stephen - I got my DBCBS fund paid in full, the Excess arises from unintentionally overfunding my Bonusplan and Flexiplans AVC’s due to the introduction of the DBCBS. I am 9 weeks into the 12 week revision process so around 3 weeks to wait!

I'm thinking of increasing my AVC's......what do you mean by "unintentionally overfunding my Bonusplan and Flexiplan AVC's"?

The value of his DBCBS fund, Flexiplan and Bonusplan combined is over 25% of his NRA65 pot value.
That overfunding was due to the DBCBS being introduced.

Both the DBCBS and AVC's fund the tax free lump sum when taking your pension benefits.

Sorry for answering someone else's question.

Thanks.....I suspect mine will be the same. So is it better to continue to pay AVC's given the tax and RM support or to stop?

As ever it will depend on your aims and circumstances, etc!

Each £1 going into AVC's(and all RM pensions) only costs £0.68 assuming you're within PSE limits, so on the way in it's a very tax efficient way to save. But if you end up paying tax on a hefty amount of it on the way out, it obviously becomes less efficient.

Once you've hit the 25% tax free of pot value, you'll effectively be losing the benefit of tax relief because you'll be paying 20% tax on the way out. Meaning from then on the only benefit is the salary sacrifice(PSE). Although investment growth would also need to be factored in.

Paying into a personal pension might be an alternative, as although you don't benefit from salary sacrifice, you'll still get the tax relief. If you can withdraw more or all of the money tax free, then that potentially becomes a better option than overfunding your AVC's.

If your RM pension is likely to be less than the personal tax allowance, drawing down a personal pension is the ideal way to increase your income up to that level. Plus you'll have tax free lump sums from both the AVC's and the personal pension, meaning you've got a tax free income of more than the personal tax allowance.

[freespeech]

Thanks Stephen - I got my DBCBS fund paid in full, the Excess arises from unintentionally overfunding my Bonusplan and Flexiplans AVC’s due to the introduction of the DBCBS. I am 9 weeks into the 12 week revision process so around 3 weeks to wait!

I'm thinking of increasing my AVC's......what do you mean by "unintentionally overfunding my Bonusplan and Flexiplan AVC's"?

The value of his DBCBS fund, Flexiplan and Bonusplan combined is over 25% of his NRA65 pot value.
That overfunding was due to the DBCBS being introduced.

Both the DBCBS and AVC's fund the tax free lump sum when taking your pension benefits.

Sorry for answering someone else's question.

Thanks.....I suspect mine will be the same. So is it better to continue to pay AVC's given the tax and RM support or to stop?

As ever it will depend on your aims and circumstances, etc!

So do any AVC's fund anything towards the lump sum for NRA60 benefits or are bonusplan, flexiplan and DBCBS all NRA65 only?

Each £1 going into AVC's(and all RM pensions) only costs £0.68 assuming you're within PSE limits, so on the way in it's a very tax efficient way to save. But if you end up paying tax on a hefty amount of it on the way out, it obviously becomes less efficient.

Once you've hit the 25% tax free of pot value, you'll effectively be losing the benefit of tax relief because you'll be paying 20% tax on the way out. Meaning from then on the only benefit is the salary sacrifice(PSE). Although investment growth would also need to be factored in.

Paying into a personal pension might be an alternative, as although you don't benefit from salary sacrifice, you'll still get the tax relief. If you can withdraw more or all of the money tax free, then that potentially becomes a better option than overfunding your AVC's.

If your RM pension is likely to be less than the personal tax allowance, drawing down a personal pension is the ideal way to increase your income up to that level. Plus you'll have tax free lump sums from both the AVC's and the personal pension, meaning you've got a tax free income of more than the personal tax allowance.

[RobertT]

So do any AVC's fund anything towards the lump sum for NRA60 benefits or are bonusplan, flexiplan and DBCBS all NRA65 only?

It's both!

For section C members, an amount of the DBCBS will be used to fund the NRA60 lump sum, because it's attached to RMSPS benefits that continued to accrue after 2012(ie inflationary increases). But most of it will be used when taking NRA65 as it's predominantly attached to benefits accrued between 2012-2018.

Flexiplan and Bonusplan can be used for both NRA60 & NRA65, along with the DBCBS, with a maximum 25% of pot value being taken as tax free cash.

Section A/B members are the same, but as they get a lump sum as standard, tax is more likely to be an issue, as Stephen500 has shown in his posts.

[stephen500]

So do any AVC's fund anything towards the lump sum for NRA60 benefits or are bonusplan, flexiplan and DBCBS all NRA65 only?

It's both!

For section C members, an amount of the DBCBS will be used to fund the NRA60 lump sum, because it's attached to RMSPS benefits that continued to accrue after 2012(ie inflationary increases). But most of it will be used when taking NRA65 as it's predominantly attached to benefits accrued between 2012-2018.

Flexiplan and Bonusplan can be used for both NRA60 & NRA65, along with the DBCBS, with a maximum 25% of pot value being taken as tax free cash.

Section A/B members are the same, but as they get a lump sum as standard, tax is more likely to be an issue, as Stephen500 has shown in his posts.

Just for information purposes.
I have no idea how this works for Avcs or the Bonus plan (whatever that is?)
But for me the Excess DBCBS (choosing option 2A for NRA 65) (over and above the 25% tax free DBCBS monies included with the standard lump sum to take it up to the max 25% lump sum, or thereabouts)
25% is tax free, with the other 75% being taxed at my normal tax rate, which should be 20%.
Ie from the £7800 excess DBCBS £5850 is taxable and for me that equals £1170 in tax.
This is for option 2A of NRA 65.

db1.jpg

db2.jpg

[stephen500]

So this Friday my weekly wage has gone up by £23.60 as my pension contributions have stopped.
I have four more weeks at work, before I hang up my boots, so a little pay rise for the month.
First monthly pension payments due on the 30th and just my Excess Cash balance to come with in 12 weeks (approx from 1st Nov).
All smooth so far, all lump sums received (except Excess DBCBS as shown above, which is expected as this is subject to revision after reconciliation with Royal Mail wages. I am told they check that my allowances haven't changed on my provisional cash balance amount (they shouldn't have as my shift is the same).
The real unknown is whether I will pay 20% tax on my excess DBCBS. It is around £7800. I am due to pay tax on 75% on £5850. If I pay 20% it will be £1170.
Up to wk 30 (30/10/20) my Assessable pay is £21512.34
Wk 31 £742.68
Wk 32 £574.12
Wk 33 £742.68
Wk 34 £742.68
wk 35 £742.68
wk 36 £574.12
Wk 37 £742.68 (final weeks wages, Annual leave with SA payment)
Total accessible pay for Tax year from Royal Mail £26373.98
Total anticipated pension monthly payments till end of tax year 20 to 21 £4936.95
Total accessible pay for tax purposes £31,310.93 which is below the 50% threshold for 40% tax.
So I should not have to pay 40% on my Excess DBCBS.
However HRMC said RMPP may apply a week 1 code, which may mean I may pay excess tax of around £900 (Ie some at 40% which I am not due to pay), which they say I can claim back using HRMC form P53Z. (for small lump sums).
I also have to leave RM within 13 weeks (from memory, check with HR) to get my £750 pension advice money. (not applicable for others if they don't take their NRA65 or the new CDC scheme has come in, or you stay in employment with RM)
So that is where I am up to.

[TheStrangler]

What is the significance of having to leave within 13 weeks from now to get the pension advice money?
That takes you to (roughly) end of January which doesn't sound a particularly relevant time to have taken it by?
Surely if you leave any time prior to the new scheme being officially introduced you're entitled to it?

[RobertT]

What is the significance of having to leave within 13 weeks from now to get the pension advice money?
That takes you to (roughly) end of January which doesn't sound a particularly relevant time to have taken it by?
Surely if you leave any time prior to the new scheme being officially introduced you're entitled to it?

I think Stephen means the scheme has a 13 week grace period when you have to leave the company after taking your NRA65 benefits, to qualify for the £750.

[TheStrangler]

Thanks that explains it.
I wonder if the new scheme was introduced during that 13 weeks you'd still be entitled to it..

[stephen500]

What is the significance of having to leave within 13 weeks from now to get the pension advice money?
That takes you to (roughly) end of January which doesn't sound a particularly relevant time to have taken it by?
Surely if you leave any time prior to the new scheme being officially introduced you're entitled to it?

No, I was told by either RMPP or HR (I think it was HR, that you have to leave within (and I am sure they said) 13 weeks. Ring HR yourself to check.

[stephen500]

see update 18 at the start of the thread.

[stephen500]

Got my first monthly pensions payments today and have resigned.
Last day at work is this fri 5th Dec, but then on leave for a week and leave RM on the 11th Dec 2020.

[stephen500]

Now I have had my P45 and my last day of service, I willl be chasing up my £750 pension advice money tomorrow. I will let you know how I get on.

[stephen500]

750.jpg

[stephen500]

I spoke to HRMC today re tax, having had both my P45 from Royal Mail (week 36) and my final pay slip for week 37.
My total income accessible pay from Royal for the year to date is £25757 (finish date week 37 of tax year) and (my RMSPS and RMPP combined income for the tax year 2020-21 is £4937.) So my total income for the tax year should be £30,694.
HRMC have for the rest of the tax year, given me a tax code for RMSPS of 1128 (which means I will pay no tax on my RMSPS pension for the rest of the tax year) and because I have already had a main employment cannot add a tax code for RMPP to reduce my tax to zero for that scheme, so for now my code is BR (20%) and I will pay over the next 5 months £145 tax in total (RMPP) and nothing on my RMSPS pension.
Total income £30,694.
minus tax allowance £12350 (1235L)
Taxable income = £18344.72
20% tax due £3668.94
minus tax paid (incl RMPP tax to pay till end March 2021) £3782.20
= Tax rebate due at the end of the year £113.26
So after my rebate next year, I would have paid £32 in tax for the rest of the tax year.
As for next year. HMRC will automatically spilt my tax codes between both pensions, as they combined are just under my tax allowance.
It appears spilting a tax code between two incomes is easy, but a third one for this tax year cannot be done.
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As for Excess cash balance scheme.
I also spoke to HMRC and they told me that as they have already issued a BR code to RMPP (20%) and that as my income will be well below the 40% threshold, that there is no reason why I should pay more than 20% tax on my UCLS (excess DBCBS) of which 75% is taxable.
RMPP told me they just pay the tax they are told to pay, but agreed with me, that if HMRC have issued a BR code then it should be 20% rather than 40%.
I know if they did tax at 40% I could claim it back, but it just saves on the paperwork if it is 20% in the first place.
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£750 pension advice money - Due in Jan 21.