Lump sum calculation

[vaughanwillmore]

I can see on the portal my likely annual pension and I can also see the transfer value of my pension. What I can't see is what tax free lump sum payment I may be entitled to. Is this available anywhere? If not, does anyone know how it is calculated please? I am section C RMSPS. Many thanks.

[RobertT]

The RMSPS portal shows the pension you've accrued up to 31st March 2012.
However RM DB pensions are paid out on an Age60 and Age65 basis. With Age60 relating to service up to 31st March 2010 and Age65 from that date to 31st March 2018, plus the DBCBS.

Therefore the figures you're referring to are a mixture of Age60 and Age65 benefits(unless you left RM employment before 31st March 2010) and until you receive the annual statements from both RMSPS and RMPP, you can only guess how much lump sum you're likely to get from each element of your total pension benefits.

But as a general rule, go by the calculations on page 12 of the RMPP guide to benefits, which uses a 20x multiple to work out a pot value and then divide by 4 to get the maximum lump sum.
It's available to view here: https://www.royalmailpensionplan.co.uk/ ... ia-library

I would also point out it is only possible to transfer your RMSPS benefits(should you want to do so) to another DB pension scheme. You cannot transfer to a DC scheme for drawdown.

[nodboy]

Try this spreadsheet to help you understand your RM pension illustrations which will give you an overall overview of all your RM pensions.

You will have to wait for your statement from RMSPS to get a full picture for this year however you can use last years statements to see how the spreadsheet works and then use it again when you have all of this years information this will show you the differences year to year!!......

Note to people using this.... the lump sum calculation is of all your pensions information (i.e. NRA60 and NRA65) and not what you would receive at 60.

The spreadsheet should only use as a guideline and not to base any financial decisions on...

[freespeech]

Try this spreadsheet to help you understand your RM pension illustrations which will give you an overall overview of all your RM pensions.

You will have to wait for your statement from RMSPS to get a full picture for this year however you can use last years statements to see how the spreadsheet works and then use it again when you have all of this years information this will show you the differences year to year!!......

Please note the this spreadsheet is just an overview and not to be used to make financial decisions...

I think the spreadsheet needs some words around it. For example, the max lump sum is not very useful as you can't get both lump sums at the same time without losses. If both were drawn at NRA60 you would need to reduce the NRA65 figures by 25%. If you waited until 65 you would need to add 5 years increases to NRA60 (and you would be mad to not draw it at 60).

[renrag40]

We already know what the pension increase will be. It will be 1.1%. If you want to know what your RMSPS illustration will say just multiply last years figure by 1.011.
In fact we will know what the increase in next years pension will be before we receive this year's pension illustration. Which, says it all really.

[RobertT]

We already know what the pension increase will be. It will be 1.1%. If you want to know what your RMSPS illustration will say just multiply last years figure by 1.011.
In fact we will know what the increase in next years pension will be before we receive this year's pension illustration. Which, says it all really.

Yes it really is as simple as that! As long as you know the correct inflation rate to use and are capable of doing a bit of basic maths.....Bob is indeed your uncle!

Most calculators have a percentage function which makes things very easy.

Although I understand that many people want to see things in black and white and from the official source!

It's actually Septembers inflation figures that are used, which aren't released until October. So we don't yet know next years increase.

It's also very easy to work out a fairly accurate increase on the amount of Cash Balance you've accrued since your last statement and beyond.

[renrag40]

September's RPI figure is released on the 20th of October. Hopefully it will be 5%..... no higher.

[freespeech]

We already know what the pension increase will be. It will be 1.1%. If you want to know what your RMSPS illustration will say just multiply last years figure by 1.011.
In fact we will know what the increase in next years pension will be before we receive this year's pension illustration. Which, says it all really.

Yes it really is as simple as that! As long as you know the correct inflation rate to use and are capable of doing a bit of basic maths.....Bob is indeed your uncle!

Most calculators have a percentage function which makes things very easy.

Although I understand that many people want to see things in black and white and from the official source!

It's actually Septembers inflation figures that are used, which aren't released until October. So we don't yet know next years increase.

It's also very easy to work out a fairly accurate increase on the amount of Cash Balance you've accrued since your last statement and beyond.

It's different depending on whether you are still with RM or have left, it's different if you have had a promotion within the same "job family". As usual...nothing is "simple".

[RobertT]

It's different depending on whether you are still with RM or have left, it's different if you have had a promotion within the same "job family". As usual...nothing is "simple".

As I said, use the correct inflation rate. Which for deferred members is CPI.

If trying to work out your Cash Balance amount just refer to past payslips and then work out RM's contribution. Not forgetting the annual increase applied at the end of the plan year.

[vaughanwillmore]

The RMSPS portal shows the pension you've accrued up to 31st March 2012.
However RM DB pensions are paid out on an Age60 and Age65 basis. With Age60 relating to service up to 31st March 2010 and Age65 from that date to 31st March 2018, plus the DBCBS.

Therefore the figures you're referring to are a mixture of Age60 and Age65 benefits(unless you left RM employment before 31st March 2010) and until you receive the annual statements from both RMSPS and RMPP, you can only guess how much lump sum you're likely to get from each element of your total pension benefits.

But as a general rule, go by the calculations on page 12 of the RMPP guide to benefits, which uses a 20x multiple to work out a pot value and then divide by 4 to get the maximum lump sum.
It's available to view here: https://www.royalmailpensionplan.co.uk/ ... ia-library

I would also point out it is only possible to transfer your RMSPS benefits(should you want to do so) to another DB pension scheme. You cannot transfer to a DC scheme for drawdown.

This is very helpful Robert, thank you so much. Can I just check something please: you referred me to page 12 of the Benefits Guide and the 20x ratio to give me the 'maximum lump sum' available to me. However, when I read the guide , it indicates it's the 'maximum lump sum I can take without eating into my annual pension'. Therefore, am I right in thinking that I could actually take more of a lump sum, should I wish to sacrifice part of my annual pension?

[vaughanwillmore]

Try this spreadsheet to help you understand your RM pension illustrations which will give you an overall overview of all your RM pensions.

You will have to wait for your statement from RMSPS to get a full picture for this year however you can use last years statements to see how the spreadsheet works and then use it again when you have all of this years information this will show you the differences year to year!!......

Please note the this spreadsheet is just an overview and not to be used to make financial decisions...

I think the spreadsheet needs some words around it. For example, the max lump sum is not very useful as you can't get both lump sums at the same time without losses. If both were drawn at NRA60 you would need to reduce the NRA65 figures by 25%. If you waited until 65 you would need to add 5 years increases to NRA60 (and you would be mad to not draw it at 60).

A very helpful spreadsheet, thank you. Can I just check something please: is this indicating the 'total lump sum' I will receive in accordance with my forecast annual pension? The reason I ask, is that there is also a 'maximum total lump sum' I can take, should I be willing to sacrifice part of my pension. I would just like to be clear what the spreadsheet is calculating. Many thanks.

[RobertT]

The RMSPS portal shows the pension you've accrued up to 31st March 2012.
However RM DB pensions are paid out on an Age60 and Age65 basis. With Age60 relating to service up to 31st March 2010 and Age65 from that date to 31st March 2018, plus the DBCBS.

Therefore the figures you're referring to are a mixture of Age60 and Age65 benefits(unless you left RM employment before 31st March 2010) and until you receive the annual statements from both RMSPS and RMPP, you can only guess how much lump sum you're likely to get from each element of your total pension benefits.

But as a general rule, go by the calculations on page 12 of the RMPP guide to benefits, which uses a 20x multiple to work out a pot value and then divide by 4 to get the maximum lump sum.
It's available to view here: https://www.royalmailpensionplan.co.uk/ ... ia-library

I would also point out it is only possible to transfer your RMSPS benefits(should you want to do so) to another DB pension scheme. You cannot transfer to a DC scheme for drawdown.

This is very helpful Robert, thank you so much. Can I just check something please: you referred me to page 12 of the Benefits Guide and the 20x ratio to give me the 'maximum lump sum' available to me. However, when I read the guide , it indicates it's the 'maximum lump sum I can take without eating into my annual pension'. Therefore, am I right in thinking that I could actually take more of a lump sum, should I wish to sacrifice part of my annual pension?

The maximum lump sum you can take from your pension benefits is 25% of pot value.

If you're in section A/B you get a lump sum as standard, but if that is lower than 25%, you can give up some pension to increase the lump sum.
You can also do the opposite and give up lump sum to get more pension.

If you're in section C you don't get a lump sum as standard, but you can give up some pension to get one.

I'm unsure which section you're in from your posts!

The DBCBS is designed to fund the lump sum when taking your benefits, so you don't have to give up as much, or any, pension to get the maximum lump sum. Which is ideal for section C members as they don't get one as standard.

However it's also possible to take the max lump sum from the pension, giving up some annual income if needed, and also take the DBCBS as a separate pot. Which would increase your overall lump sum, but only the first 25% of the DBCBS would be tax free, with the remainder being taxed under normal PAYE rules just as your wages are.

The question you've got to ask yourself is whether you value a lump sum more than the pension.
Many people seem not to appreciate the full value of the guaranteed, index linked and compounded benefit of the pension for life, which for me is one of the cornerstones of a DB pension, and just see the £££'s by taking the biggest lump sum possible.
But it's personal choice at the end of the day.

[vaughanwillmore]

The RMSPS portal shows the pension you've accrued up to 31st March 2012.
However RM DB pensions are paid out on an Age60 and Age65 basis. With Age60 relating to service up to 31st March 2010 and Age65 from that date to 31st March 2018, plus the DBCBS.

Therefore the figures you're referring to are a mixture of Age60 and Age65 benefits(unless you left RM employment before 31st March 2010) and until you receive the annual statements from both RMSPS and RMPP, you can only guess how much lump sum you're likely to get from each element of your total pension benefits.

But as a general rule, go by the calculations on page 12 of the RMPP guide to benefits, which uses a 20x multiple to work out a pot value and then divide by 4 to get the maximum lump sum.
It's available to view here: https://www.royalmailpensionplan.co.uk/ ... ia-library

I would also point out it is only possible to transfer your RMSPS benefits(should you want to do so) to another DB pension scheme. You cannot transfer to a DC scheme for drawdown.

This is very helpful Robert, thank you so much. Can I just check something please: you referred me to page 12 of the Benefits Guide and the 20x ratio to give me the 'maximum lump sum' available to me. However, when I read the guide , it indicates it's the 'maximum lump sum I can take without eating into my annual pension'. Therefore, am I right in thinking that I could actually take more of a lump sum, should I wish to sacrifice part of my annual pension?

The maximum lump sum you can take from your pension benefits is 25% of pot value.

If you're in section A/B you get a lump sum as standard, but if that is lower than 25%, you can give up some pension to increase the lump sum.
You can also do the opposite and give up lump sum to get more pension.

If you're in section C you don't get a lump sum as standard, but you can give up some pension to get one.

I'm unsure which section you're in from your posts!

The DBCBS is designed to fund the lump sum when taking your benefits, so you don't have to give up as much, or any, pension to get the maximum lump sum. Which is ideal for section C members as they don't get one as standard.

However it's also possible to take the max lump sum from the pension, giving up some annual income if needed, and also take the DBCBS as a separate pot. Which would increase your overall lump sum, but only the first 25% of the DBCBS would be tax free, with the remainder being taxed under normal PAYE rules just as your wages are.

The question you've got to ask yourself is whether you value a lump sum more than the pension.
Many people seem not to appreciate the full value of the guaranteed, index linked and compounded benefit of the pension for life, which for me is one of the cornerstones of a DB pension, and just see the £££'s by taking the biggest lump sum possible.
But it's personal choice at the end of the day.

Once again, thank you very much Robert. I am a section C member. I guess the key consideration for me then, is how much of my £11,000 per annum pension do I need to give up, to gain a lump sum of £10K? Do you know what ratio is used pleased?

[freespeech]

Try this spreadsheet to help you understand your RM pension illustrations which will give you an overall overview of all your RM pensions.

You will have to wait for your statement from RMSPS to get a full picture for this year however you can use last years statements to see how the spreadsheet works and then use it again when you have all of this years information this will show you the differences year to year!!......

Please note the this spreadsheet is just an overview and not to be used to make financial decisions...

I think the spreadsheet needs some words around it. For example, the max lump sum is not very useful as you can't get both lump sums at the same time without losses. If both were drawn at NRA60 you would need to reduce the NRA65 figures by 25%. If you waited until 65 you would need to add 5 years increases to NRA60 (and you would be mad to not draw it at 60).

A very helpful spreadsheet, thank you. Can I just check something please: is this indicating the 'total lump sum' I will receive in accordance with my forecast annual pension? The reason I ask, is that there is also a 'maximum total lump sum' I can take, should I be willing to sacrifice part of my pension. I would just like to be clear what the spreadsheet is calculating. Many thanks.

The thing to be aware of from the calculator is that the total lump sum cannot be taken together unless you defer your NRA60 benefits until 65 which would be madness. If you take the benefits at 60 the NRA60 info is correct but the NRA65 pot would need to be reduced by 25% (5% per year taken early). In other words the total available is the sum of the two pots taken five years apart.

[RobertT]

Once again, thank you very much Robert. I am a section C member. I guess the key consideration for me then, is how much of my £11,000 per annum pension do I need to give up, to gain a lump sum of £10K? Do you know what ratio is used pleased?

As a rough guide go by a ratio of 1:20. So for each £1 of pension you give up, you get £20 lump sum.
In your case you will lose about £500 in pension to get a £10k lump sum.

But don't forget you also have the DBCBS to provide a lump sum.