Experience of claiming my NRA 60 and 65 pension

[stephen500]

My last post on the diary of claiming my pension and what I have learned.
I may just have been very lucky, as I know others have struggled to get their pension and some thoughts.
First apply in plenty of time and if you really want your pension on your NRA date, possibly consider asking for it in advance of time.
In other words don't wait for them to write to you as you approach your NRA date.
RMSPS state on their own website, that the process takes at least 17 weeks.
I applied 6 months in advance and was told the most I could apply in advance was 5 months, but they still went ahead with the 6 month time frame.
If still working. You must apply through RMPP
If left Rm - You must apply to both RMPP and RMSPS
-----------------------------------------------------
Remember (Section B & C) that your DBCBS quote will not be included in your intial quote.
(You can find out the rough amount you would be due, by finding your annual pensionable contributional pay and then finding 19.6% of that to give you your yearly DBCBS) You then need add up the years and months since Apr 2018, until the scheme ceases
------------------------------------------------------------
Once you return the forms stating you wish to take your pensions, you will then receive your quotes with your "provisional DBCBS fund value".
Your pension figures are based on provisional pay from HR and will be revised again just before payment and then again up to 12 weeks after, known as a "reconcilation period". The good news is that in the main, your figures would only improve, not get worse.
Then you will have a final annual pension and DBCBS fund value and your monthly pension and excess DBCBS adjusted if need be.
My pension stayed the same, but my DBCBS improved.
-----------------------------------------------------
Important: Take some time to look at your options for both NRA 60 and NRA 65, get your calculator out and look at the different options, what they pay and the amounts of any lump sum (I plan to develop an excel spread sheet, where you can put in your amounts for different outcomes.) Don't rush and ask questions, here if you wish - but remember answers are opinions not financial advice.
You will have several options and options may vary by number, if you have Avcs.
Options will include Basic pension with min lump sum, Reduced pension with either a max lump sum or any combination of between 1% tax free allowance and 25% max tax free allowance. Taking say 1% lump sum would increase your pension, taking 25% would for section B reduce your yearly pension by around 15% (NRA 60)
For Section C, you have no lump sum, but you can give up (I think 25% of your pension) to gain the max 25% tax free lump sum, or any amount in between.
As for NRA 65. options vary and include - Section B- Basic pension and min lump sum, Reduced pension of around 15% and max lump sum of 25% or any range between say 1% and 25%, with pension increased if you take a smaller level of lump sum.
Option 2 (for me) Your options may be different may have been my best choice and appears to have given me the chance to get the most lump sum, although I actually took option 2A. Although that will mean, it will take me 16 years to get back, what I lost in lump sum.
An option for taking part of your DBCBS with your min main tax free lump to make it up to around what your max lump sum would have been, whilst maintaing your basic annual pension (without reduction) and then your excess DBCBS, which will be your DBCBS pension fund, minus what you already take with your tax free cash lump sum main benefits.
Other options are an enhanced pension and choices of what to do with your DBCBS (but giving up all your standard lump sum). I would not recommend this. It can take up to 30 years of annual pension payments to get back your loss of the standard or max lump sum.
With some of the options, you can choose what to do with your DBCBS fund
You can use it towards an annuity - taking up to 25% tax free and the rest purchasing an annuity - Think long and hard and check annunity rates
You can transfer your DBCBS fund to another pension provider who "may offer you different choices"
You can use your whole DBCBS fund as an uncrystallised fund pension lump sum, with 25% being tax free and 75% taxed at your tax rate (mine was 20% although only part of mine was UFPLS, as I took part with my min lump sum)
I think Section C options vary, but include giving up part of your pension for up to 25% max tax free lump sum and choices for your DBCBS.
--------------------------------------------
Return all forms within the time frames indicated on the letters.
I used either special or certainly recorded delivery.
Ring RMPP or RMSPS for help if you need too.
I filled in the life time allowance form for RMPP with figures for my RMSPS pension, although RMSPS were happy for me to just tick the apppropriate boxes as they said they had access to RMPP figures but not vice versa.
Make sure you sign and date every thing and fill in all that is required. Double check.
------------
Once you have your pension contact HMRC if need be to discuss your tax codes.
I suggest waiting until after your first pension payments.
--------------
I can't think of any thing else.
As I said my pension applications went like a dream and every thing went to time.
I got my lump sums on the date I should, along with my pensions and my DBCBS excess amount about 12 weeks after my intial NRA 65 lump sum.
Not every one has been as lucky, but if you apply in advance, you increase the chances of getting it on time.
Any questions, please ask.
Please don't make pension decisions based on my opinion, I mess up and one of the options I took, lost me £3450 in lump sums.
So look at options, calculate carefully, ask the pension centre questions or a financial advisor.
Alway happy to tell you what I would have or did do. But you have to make your own decisions.
There are many on this forum that can offer you their opinions incl Robert T.

[freespeech]

My last post on the diary of claiming my pension and what I have learned.
I may just have been very lucky, as I know others have struggled to get their pension and some thoughts.
First apply in plenty of time and if you really want your pension on your NRA date, possibly consider asking for it in advance of time.
In other words don't wait for them to write to you as you approach your NRA date.
RMSPS state on their own website, that the process takes at least 17 weeks.
I applied 6 months in advance and was told the most I could apply in advance was 5 months, but they still went ahead with the 6 month time frame.
If still working. You must apply through RMPP
If left Rm - You must apply to both RMPP and RMSPS
-----------------------------------------------------
Remember (Section B & C) that your DBCBS quote will not be included in your intial quote.
(You can find out the rough amount you would be due, by finding your annual pensionable contributional pay and then finding 19.6% of that to give you your yearly DBCBS) You then need add up the years and months since Apr 2018, until the scheme ceases
------------------------------------------------------------
Once you return the forms stating you wish to take your pensions, you will then receive your quotes with your "provisional DBCBS fund value".
Your pension figures are based on provisional pay from HR and will be revised again just before payment and then again up to 12 weeks after, known as a "reconcilation period". The good news is that in the main, your figures would only improve, not get worse.
Then you will have a final annual pension and DBCBS fund value and your monthly pension and excess DBCBS adjusted if need be.
My pension stayed the same, but my DBCBS improved.
-----------------------------------------------------
Important: Take some time to look at your options for both NRA 60 and NRA 65, get your calculator out and look at the different options, what they pay and the amounts of any lump sum (I plan to develop an excel spread sheet, where you can put in your amounts for different outcomes.) Don't rush and ask questions, here if you wish - but remember answers are opinions not financial advice.
You will have several options and options may vary by number, if you have Avcs.
Options will include Basic pension with min lump sum, Reduced pension with either a max lump sum or any combination of between 1% tax free allowance and 25% max tax free allowance. Taking say 1% lump sum would increase your pension, taking 25% would for section B reduce your yearly pension by around 15% (NRA 60)
For Section C, you have no lump sum, but you can give up (I think 25% of your pension) to gain the max 25% tax free lump sum, or any amount in between.
As for NRA 65. options vary and include - Section B- Basic pension and min lump sum, Reduced pension of around 15% and max lump sum of 25% or any range between say 1% and 25%, with pension increased if you take a smaller level of lump sum.
Option 2 (for me) Your options may be different may have been my best choice and appears to have given me the chance to get the most lump sum, although I actually took option 2A. Although that will mean, it will take me 16 years to get back, what I lost in lump sum.
An option for taking part of your DBCBS with your min main tax free lump to make it up to around what your max lump sum would have been, whilst maintaing your basic annual pension (without reduction) and then your excess DBCBS, which will be your DBCBS pension fund, minus what you already take with your tax free cash lump sum main benefits.
Other options are an enhanced pension and choices of what to do with your DBCBS (but giving up all your standard lump sum). I would not recommend this. It can take up to 30 years of annual pension payments to get back your loss of the standard or max lump sum.
With some of the options, you can choose what to do with your DBCBS fund
You can use it towards an annuity - taking up to 25% tax free and the rest purchasing an annuity - Think long and hard and check annunity rates
You can transfer your DBCBS fund to another pension provider who "may offer you different choices"
You can use your whole DBCBS fund as an uncrystallised fund pension lump sum, with 25% being tax free and 75% taxed at your tax rate (mine was 20% although only part of mine was UFPLS, as I took part with my min lump sum)
I think Section C options vary, but include giving up part of your pension for up to 25% max tax free lump sum and choices for your DBCBS.
--------------------------------------------
Return all forms within the time frames indicated on the letters.
I used either special or certainly recorded delivery.
Ring RMPP or RMSPS for help if you need too.
I filled in the life time allowance form for RMPP with figures for my RMSPS pension, although RMSPS were happy for me to just tick the apppropriate boxes as they said they had access to RMPP figures but not vice versa.
Make sure you sign and date every thing and fill in all that is required. Double check.
------------
Once you have your pension contact HMRC if need be to discuss your tax codes.
I suggest waiting until after your first pension payments.
--------------
I can't think of any thing else.
As I said my pension applications went like a dream and every thing went to time.
I got my lump sums on the date I should, along with my pensions and my DBCBS excess amount about 12 weeks after my intial NRA 65 lump sum.
Not every one has been as lucky, but if you apply in advance, you increase the chances of getting it on time.
Any questions, please ask.
Please don't make pension decisions based on my opinion, I mess up and one of the options I took, lost me £3450 in lump sums.
So look at options, calculate carefully, ask the pension centre questions or a financial advisor.
Alway happy to tell you what I would have or did do. But you have to make your own decisions.
There are many on this forum that can offer you their opinions incl Robert T.

Useful......thanks. What was your error that cost you the >£3k?

[masterblaster]

I believe pensions are made deliberately made complicated, so millions will go unclaimed. - That's all I have to say.

[stephen500]

The error that cost me £3450 was choosing for NRA 65 option 2A instead of options 2.
I would have got around £220 less pension a year for option 2, but would have received, once the DBCBS was taken into account another £3450 in lump sum.
So the in order to get my lost lump sum back (£3450 divided by £220) I now have to draw my pension for around 16 years.
At least I didn't choose option 3 or 3B, where if I remember correctly, you have to draw your pension for 30 years to get your money back.
So go through each option with a fine toothcomb and a calculator and weigh each option up against the other,and don't think the max annual pension gives you more money, because it does not, unless you live till around 95 (taking your pension at 65).
I made my choice and 2A (NRA65) was still very good for me.

[RobertT]

I believe pensions are made deliberately made complicated, so millions will go unclaimed. - That's all I have to say.

RM pensions are stupidly complicated, which is mainly due to the many changes that have happened to the scheme/s since 2008 in particular.
Most pensions are nowhere near as hard to understand!

Ultimately it's your pension that you've paid into for years. It's your income for the rest of your life, and your spouse will get 50% after your death.
Surely it's in yours and your families interest to understand it and make sure you claim it no later than NRA?

[RobertT]

The error that cost me £3450 was choosing for NRA 65 option 2A instead of options 2.
I would have got around £220 less pension a year for option 2, but would have received, once the DBCBS was taken into account another £3450 in lump sum.
So the in order to get my lost lump sum back (£3450 divided by £220) I now have to draw my pension for around 16 years.
At least I didn't choose option 3 or 3B, where if I remember correctly, you have to draw your pension for 30 years to get your money back.
So go through each option with a fine toothcomb and a calculator and weigh each option up against the other,and don't think the max annual pension gives you more money, because it does not, unless you live till around 95 (taking your pension at 65).
I made my choice and 2A (NRA65) was still very good for me.

On the plus side the extra £220 pension will increase with inflation each year, as you're in section B that will be by CPI. Meaning a slightly shorter pay back time.

On the down side, tax may become payable on it once you reach state pension age, assuming it doesn't beforehand.

The average 60 year old UK male is expected to live to 85 on average. So the bigger pension isn't necessarily the worst choice in pure money terms.

[Hawkey99]

Thats surely a crucial point Robert.

Most Royal Mail employees will start to pay income tax when they draw their state pension.

Another major factor to include when considering your options and is whether less pension and more lump sum is better or more pension less lump sum....
Decisions, Decisions, Decisions........

[deltaforce]

Or more to the point is what you do with your lump sum to stop it losing value. At the present time interest is at a all time low and even if you stash it in a bond you’ll be lucky to get 0.5% to 0.6%

[stephen500]

Or more to the point is what you do with your lump sum to stop it losing value. At the present time interest is at a all time low and even if you stash it in a bond you’ll be lucky to get 0.5% to 0.6%

At present my lump sums are in standard savings accounts earning very little. I certainly am not going to invest in any thing risky. We own our house, so RPI is more appropriate for us as housing costs are not some thing we have to think about.
At present inflation is not too bad and at least my annual pension is protected up to 5%.
Who knows in years to come, if inflation was to let rip, I might have to get a little part time job. But hopefully I can hold out till my state pension. Currently I am 60 and need to get to 66 and 10 months for my state pension.

[RobertT]

At present my lump sums are in standard savings accounts earning very little. I certainly am not going to invest in any thing risky. We own our house, so RPI is more appropriate for us as housing costs are not some thing we have to think about.
At present inflation is not too bad and at least my annual pension is protected up to 5%.
Who knows in years to come, if inflation was to let rip, I might have to get a little part time job. But hopefully I can hold out till my state pension. Currently I am 60 and need to get to 66 and 10 months for my state pension.

But what is your definition of risky?

I appreciate you don't want to do anything silly with your cash, but at the moment you're savings may well be going down in value, due to inflation being higher than the interest rate on your savings. That in itself is a risk and will be compounded over time!

Something like corporate bonds could be an alternative, particularly for the money you don't plan to touch for another 4-6 years.
They sit mid way between cash and equities on the risk scale and offer a decent return compared to cash, and if you go for a fund you'll be automatically spreading the risk.
You can do that via an equity ISA, meaning no chance of any nasty tax to pay.

But if you still want to be in cash, why not spread it around a bit!

Could Premium Bonds be an option for some of your cash?
Although there's no guarantee of any returns at all, I know a few people, including myself, who've made more than most Building Societies offer.
Mine provided a 1.70% return during 2020, and there's always that chance of a bigger win.

Take a look at some of the price comparison sites, as they do deals on savings accounts too. Try and get the best rates you can!

[stephen500]

At present my lump sums are in standard savings accounts earning very little. I certainly am not going to invest in any thing risky. We own our house, so RPI is more appropriate for us as housing costs are not some thing we have to think about.
At present inflation is not too bad and at least my annual pension is protected up to 5%.
Who knows in years to come, if inflation was to let rip, I might have to get a little part time job. But hopefully I can hold out till my state pension. Currently I am 60 and need to get to 66 and 10 months for my state pension.

But what is your definition of risky?

I appreciate you don't want to do anything silly with your cash, but at the moment you're savings may well be going down in value, due to inflation being higher than the interest rate on your savings. That in itself is a risk and will be compounded over time!

Something like corporate bonds could be an alternative, particularly for the money you don't plan to touch for another 4-6 years.
They sit mid way between cash and equities on the risk scale and offer a decent return compared to cash, and if you go for a fund you'll be automatically spreading the risk.
You can do that via an equity ISA, meaning no chance of any nasty tax to pay.

But if you still want to be in cash, why not spread it around a bit!

Could Premium Bonds be an option for some of your cash?
Although there's no guarantee of any returns at all, I know a few people, including myself, who've made more than most Building Societies offer.
Mine provided a 1.70% return during 2020, and there's always that chance of a bigger win.

Take a look at some of the price comparison sites, as they do deals on savings accounts too. Try and get the best rates you can!

Thank you I will look around.
One thing is certain, inflation will not be as bad as the interest I was paying on credit cards!
Which a couple of months ago, I got rid of!

[stephen500]

I suppose inflation is personal, apart from yearly rises of council tax, water rates and gas/elec. Ie it depends on what each individual does with their money and if that area of spending is affected by inflation. Ie if I wanted to spend all my money on clothes, which I don't! Then recently clothing has decreased inflation along with food. However brexit may increase inflation in food areas because of the cost of movement of food supplies.
Things i buy for treats are food, airline tickets, hotel bookings and self catering cottages.
So what may be inflation for some body, ie alcohol (I don't drink) may not be for some one else.
I am protected against increased housing costs, as I don't have a mortgage or rent.
But I am more prone to the cost of inflation with the maintainence of my home.
So I suppose an inflation basket is just representive of what average people spend.

[RobertT]

Yes the inflation rate is just an average over a 'basket of goods', which can include many different things. As prices can change all the time, you might gain on some products but lose on others without realising it.

But when saving, it's much easier to know if you're in the red or not!

If inflation is 2% and your savings rate is 1% for example, you can see quite clearly that your money is going down in value.

[stephen500]

Yes the inflation rate is just an average over a 'basket of goods', which can include many different things. As prices can change all the time, you might gain on some products but lose on others without realising it.

But when saving, it's much easier to know if you're in the red or not!

If inflation is 2% and your savings rate is 1% for example, you can see quite clearly that your money is going down in value.

The point I was making and this is taking it to the extreme, if this winter I spent all my lump sum on clothes, I would lose next to nothing as clothes are getting cheaper, in fact I should be able to buy more clothes!
But if I want to buy a new car, well that is getting more expensive, some by 20%, so I could get less brand new cars.
So yes inflation for saving is simple, but how inflation affects me, depends what I spend my money on and whether the price of those particular goods have gone up.
I think for me, once covid is over, the price of flights and hotels may go up and that really would affect me!

[RobertT]

And if you don't save it efficiently before you spend it, it'll mean even more expensive flights and hotels.