Pension at 55 quote and Avc

[jchewitt1967]

Hi , I turn 55 this month and I am going to ask for a quote to get my pension now , does anybody know when you ask for an illustration to take your pension early does it include any AVCs saved or do I need to contact someone else for that ? Cheers .

[RobertT]

I have no personal experience of this as I'm not old enough to access any of my pension yet. But from other posts on this forum I believe there are two stages:

1. You get your first quote which only includes your pension.
2. You then say you want to proceed and they send you another quote including any AVC's and the DBCBS.

Someone with experience may come along soon to clarify?

You can also log into your Scottish Widows account/s anytime to find out the current value of your Bonusplan and/or Flexiplan.

[Postee2]

In relation to this . . . .if you take the AVC in full as cash at 55 (or will be 57 for me I think), . . .are you able to just carry on paying into the collective defined pension until you are 67 ? Because otherwise it would be a case of losing 5% per year of the cash balance fund and other elements of the pension.
Any kind of clarity on this would be appreciated.

[RobertT]

In relation to this . . . .if you take the AVC in full as cash at 55 (or will be 57 for me I think), . . .are you able to just carry on paying into the collective defined pension until you are 67 ? Because otherwise it would be a case of losing 5% per year of the cash balance fund and other elements of the pension.
Any kind of clarity on this would be appreciated.

The rules associated with all current RM pension arrangements will still be in place going forward. So your NRA60 benefits can still be taken at 60 without reduction and the same with your NRA65 at 65.
Taking them before NRA will see a 5% per year reduction.

The DBCBS is predominantly attached to NRA65 benefits, but some can also be taken with NRA60. Although the exact circumstances will vary with the individual to some extent, particularly those with AVC's.

The current AVC's(Bonusplan & Flexiplan) can still be taken with NRA60 & NRA65 benefits to fund the tax free lump sum, or else transferred out to another pension arrangement to be accessed separately from the legal minimum age, currently 55.
Bearing in mind that if you do transfer normal DC pension rules will apply, which is only the first 25% is guaranteed to be tax free, with the remainder being classed as income and taxed under normal PAYE rules.

The new CDC pension will be totally separate from all previous and current RM pension schemes, it's NRA of 67 won't have any bearing on what you've already built up.
You will be able to pay into the CDC scheme until 67 and beyond, as long as you're employed by RM.

The CDC scheme also includes a lump sum, the DBLSS, to provide tax free cash, which can be increased by paying an extra 1% of pay, matched by RM. Plus they'll also be a new AVC arrangement, which I assume will be similar to Flexiplan.

The current AVC's and the DBCBS will be separate from the new CDC scheme!

[Postee2]

Thanks Robert. So does that mean in order to take the AVC before the rest of my pension (and to keep paying in to the collective scheme), I would need to first transfer the AVC element to a different provider ?
Have I interpreted that correctly ?.And in regards to the 25% tax free element, how would they work that out if the bulk of my pension was still untouched ? Would it be worked out against all pensions combined (and how complicated would that be and feasible - would it be a case of having to obtain a full valuation of everything at 55 and then if my AVC equated to 25% of the whole amount for example would I then assume I have "crystallised" my pension ?
But if the AVC didn't amount to 25%, would that mean I still have some of my pension to come tax free even if I am taking it a decade after my AVC (if the AVC amount added up to less than 25% of my entire pension valuation).
Hope that makes some sense.

[RobertT]

If you want to access just your AVC's separately from your NRA60/65, you will have to transfer them to another pension provider.

You just transfer the balance and that becomes a separate thing to your other RM pension benefits. You can then take 25% as tax free cash with the rest being classed as income.
Drawing down the other 75% over a period of time is likely to be more tax efficient than just taking it all in one go.

You'll then be left with your NRA60, NRA65 and DBCBS.
Plus your NRA67(CDC & DBLSS).

The usual use of AVC's(Bonusplan & Flexiplan) is the fund the tax free cash when taking your NRA60/65 benefits and as a general rule that will be the most tax efficient for the majority of people, as they can often be used for the whole 25%.

But for larger amounts it might be better to either transfer out AVC's before you take any benefits, or else use them to fund the tax free cash with your NRA60 and then transfer out the remainder.

As ever with pensions, there is 'no one size fits all' and it will come down to personal circumstances to one degree or another.

[Postee2]

Thank You for that very helpful answer Robert.