Cash balance fund.

[thelastsuspect]

Question for Robert T,
I have now got my age 60 & 65 estimate, Not sure how the cash balance fund works, is the lump sum included in the 65 estimate or is this separate, and if so how do you get an estimate for that and how and when do you get it?
Many thanks in advance for clarification.

[freespeech]

I think you've highlighted the biggest issue with the estimates.......the DBCBS amount and any AVC's you may have are not included. You only get the detail once you commit. It's madness.

[mags999]

has anybody any idea how much is in this fund as i assume we all have roughly the same amount give or take and does it get reduced if you take it early say at 60

[postie2007]

Hi thelastsuspect,
I am in the same situation I have committed and am awaiting quotes including AVC and cash balance figures been waiting 2 weeks.

[mark.cup]

It's like something from the dark ages how on earth do they expect people to make possibly one of the biggest decisions in life with only half of the information.....

I'm baffled

[RobertT]

I have no personal experience of getting a RM pension quote. But there have been posts from others that suggest that you have to commit to taking your pension before they tell you how much you're going to get in Cash Balance(DBCBS) and AVC's.

But is that actually true?

So, you get your first quote and return the forms saying you want to choose option 2, for example. They then update your figures accordingly including the DBCBS and any AVC's.

Presumably you then have to return the second lot of forms aswell before they actually start the process of paying out your pension?

So what happens if you don't return the second lot of forms?
I'm assuming they won't pay out your pension and so is there any commitment at all?

Perhaps someone can confirm?

The amount of Cash Balance an individual will have accrued will depend on their pensionable pay, which will vary greatly depending on the job you do and the hours you work.

A full time HGV driver will have more than a part time walking postie, for example.

Your last statement(2021) will tell you how much you've earned after 3 years. A very rough way of working out approximately what 2022's will be, is to divide 2021's figure by 3 and then multiply by 4.
So if last years figure was £15k, this years will be about £20k.

If you want to work out how much is going in each week. Simply divide your contribution by 6 and then multiply by 19.6.

According to the RMPP website, the DBCBS is reduced when taking it early. But posts on this forum would suggest it's by a minimal amount.

[postie2007]

Hi Robert,
On the first quote you just tick the box that you intend to take your pension only. Then the figures inc cash balance and AVCs are calculated and sent to you in a final quote.

[RobertT]

In which case it makes it more important that members learn how the pension scheme works, so they can make an informed decision.

Although I don't really see how you can not have a final say, once you've got the full figures.

[Duran]

I struggle to see how they can take any of your cash balance for the 19.6% that as gone into it from you and royal mail.That is banked money. I can however see reduction for any interest added to the cash balance if taken early.

[RobertT]

I struggle to see how they can take any of your cash balance for the 19.6% that as gone into it from you and royal mail.That is banked money. I can however see reduction for any interest added to the cash balance if taken early.

The 19.6% is guaranteed and once the annual bonuses have been added, they're also guaranteed. But only at age 65.

The reduction is down to the fact that it's a defined benefit scheme and with an NRA of 65. So if you take it beforehand, it will be reduced. Although by how much is a bit of a mystery.

To complicate things, some of the DBCBS can also be taken with the RMPP element of the NRA60, which as far as I'm aware, wouldn't be reduced.

[fly-catchers]

My NRA65 is due in January when I hit 65. Do you have to take the DBCBS at 65 or can you leave it until at least the next bonus is added? I guess not.

[RobertT]

My NRA65 is due in January when I hit 65. Do you have to take the DBCBS at 65 or can you leave it until at least the next bonus is added? I guess not.

The DBCBS was designed initially to fund the tax free lump sum, so we wouldn't have to give up any pension to get one. It's particularly good for section C members as they don't get a lump sum as standard.

You can transfer it out to another pension before you take your NRA65 benefits, but to be honest I'm not sure whether you can defer it afterwards or not?

However, any decision to take it independently of your NRA65 benefits would mean only the first 25% being guaranteed to be tax free, with the remainder coming under normal PAYE tax rules.

So taking it with NRA65 benefits is likely to be the better route from a tax point of view.

[heapsy]

I struggle to see how they can take any of your cash balance for the 19.6% that as gone into it from you and royal mail.That is banked money. I can however see reduction for any interest added to the cash balance if taken early.

It is a standard thing with DB schemes. The whole idea is to protect the pension scheme. Imagine the days when you could take your pension at 50. Many did take them and will draw their pension longer than they paid into them. ( I deliver to a former teacher from my last school who retired at 54. He's now 86 )If everyone did it, the scheme would be bankrupt eventually. I know of other people who worked in our office. One retired before I started in the 80s. Died just over a year ago at 93. My old union rep retired at 60, recently turned 90.
People seem to think this is a Royal Mail thing, it isn't. The earliest you can take your pension now is 55. Soon to be rising to 57. It's due to an increase in life span. Although it's debatable. Most peoples life span is determined by their genes / lifestyle. Even the pension companies are telling the government that the increase in pension age should be reviewed, as life expectancy has been dropping.