Cash balance

[Belgium]

First off apologies if this has been answered hundreds of times before.
I left Royal Mail last year after 43 years service, and turn 60 in August and have just received some of my pension forms,
Can anyone explain the cash balance to me.
I have a cash balance of £30,000, do I have to take this all now or is it part of my nra65 benefits, can I take some and leave the rest or is that not possible.
Any info given would be greatly appreciated

[heapsy]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live off. For me, it's too big a hit. Also, in my cash, I have money from other sources.

[Dorset Plodder]

Check out the Pensions Forum and look in the existing Posts/Replies from Robert T, Belgium.

I'm sure you'll find an answer in there. Too late for you I'm afraid, but the CWU are investigating running workshops for members to attend coming up to their retirement to expalin just these sort of choices. Most of us have no idea.

If you have your forms they should have illustrations on there showing several options. Normally they'll offer a Tax Free Lump sum and a monthly ammount as a pension, then there used to be another illustration showing a Larger Tax Free Lump sum and a smaller monthly bonus. The choice is your to make and you have to tell them.

Everyone's go to option nowadays seem to be "Consult an Independent Finacial Adviser" and this might be the way you want to go as Pensions are Big Life Effecting Decisions. Hope that helps?

[Belgium]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live of. For me, it's too big a hit. Also, in my cash, I have money from other sources.

The forms I received had a small NRA60 amount, a reduced NRA65 amount then a separate form with the cash balance amount, it didn’t make it clear if this cash balance could be taken now or left for another time, I assume you can take it now with no penalties apart from the obvious tax implications, I like to think I’m a reasonably intelligent person but Royal Mail pensions are Einstein territory

[Dorset Plodder]

Because most of us have several different pensions within Royal Mail (depending on the time served and different cut off dates) it can indeed seem very confusion.

One of these pension schemes simply builds up a cash fund, which you buy an Annuity with .... which provideds you with a Regular Pension..... It was an inferior pension and this may be the "Cash Balance" element you mention.

As previously mentioned I strongly suggest you check out the "Pensions" forum on here. This subject has been discussed many times, and there's smarter cookies than me on there that should be able to help you. Good Luck.

[hatter68]

I was given the option to take lump sum from cash balance when I turned 60 or deferred until turned 65.

[HWalden]

The cash balance held in the RMDBCBS provides you with three options:-
1. Drawdown - first 25% is tax free
2. Buy an annuity
3. Transfer the balance to a SIPP (Self Investment Personal Pension)

Foe options 2 & 3,if your cash balance exceeds £30K you must seek the services of an IFA (independent financial advisor) qualified in advising on Defined Benefit Schemes which costs £2.5 - £3k that's in addition to any fund management fees.

[Jefferson Starfish]

The cash balance held in the RMDBCBS provides you with three options:-
1. Drawdown - first 25% is tax free
2. Buy an annuity
3. Transfer the balance to a SIPP (Self Investment Personal Pension)

Foe options 2 & 3,if your cash balance exceeds £30K you must seek the services of an IFA (independent financial advisor) qualified in advising on Defined Benefit Schemes which costs £2.5 - £3k that's in addition to any fund management fees.

That only applies to section f members.

Everyone else can use it to fund the lump sum when taking mainly nra65 pension. As someone else has already said, some is often used to fund nta60 lump sum too.

[freespeech]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live of. For me, it's too big a hit. Also, in my cash, I have money from other sources.

Yes, DBCBS is part of NRA65 BUT a small part of it is NRA60 so that bit, taken at 60, won't be reduced.....where is Robert when we need him to clarify :)

[heapsy]

Out of Office lol

[Jefferson Starfish]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live of. For me, it's too big a hit. Also, in my cash, I have money from other sources.

Yes, DBCBS is part of NRA65 BUT a small part of it is NRA60 so that bit, taken at 60, won't be reduced.....where is Robert when we need him to clarify :)

Robert was fab, a big loss to this forum.

[Dorset Plodder]

Robert was fab, a big loss to this forum.

Totally Agree Mate

I think he was the ONLY one who actually understood RMs multiple pension schemes (apologies to all other Pension Geeks on Here) AND took the time and effort to explain them clearly to all us thick buggers

I'll alway be grateful for him explaining that we didn't have to take the Escro portion of the backpay as cash but could get it paid into our Pensions!

[Raseth2011]

The Cash Balance is part of the NRA65 pension. Unless someone can tell you different, you can only take it with your NRA65, which would mean taking that early. Remember, any pension taken before NRA will be subject to early payment reductions of 5% per year. This also includes the Cash Balance and lump sum. I intend to leave my NRA65 until I rech 65. I'm using my lump sum at 60 to live of. For me, it's too big a hit. Also, in my cash, I have money from other sources.

The forms I received had a small NRA60 amount, a reduced NRA65 amount then a separate form with the cash balance amount, it didn’t make it clear if this cash balance could be

hi
is cash balance tax free ?

[heapsy]

Yes. But since the new scheme hasn't happened yet, We will probably end up paying some tax, as it may be worth more than 25% of the total value of the scheme. With the new scheme taking time to implement, this will only grow over time.

[HWalden]

Only the first 25% of the cash balance is tax free (i.e. 25% of the RMDBCBS) - I have the paperwork from RM Pension Administrators to confirm this. There are no plans for RM Pension administrators to transfer the cash balance into the new shared responsibility pension scheme when it is set up. The three options available with the cash balance are mutually exclusive, which means you cannot drawdown 25% to get the cash balance below £30K to avoid using the services of an IFA for options 2 & 3. The number of postal workers with a cash balance exceeding £30K is going to increase while the delay in setting up the new shared responsibility pension continues. That's why I have requested that the CWU and the pension trustees make every effort to get the new scheme set up as quickly as possible. Neither party have indicated to me that they have the desire to act expediently on this issue. In summary, I think the likelihood is many postal workers will draw down the whole of their cash balance in a phased withdrawal to avoid using an IFA thus incurring an income tax liability.

One caveat to the above, is I do not know what the position is if you have another RM pension in addition to the cash balance. Can you aggregate the two values together to calculate your tax free 25% and then nominate that the cash balance represents the lion's of the 25% of the aggregate value. I don't think so, they are likely to be treated as separate schemes. I suggest anyone who seeks clarification should contact the RM pension administrators help desk in the first instance and then Mark Rugman, Pension Trustee if you are still unclear.