Taking NRA60 without the cash balance part.

[Flashman_]

Question for Robert T possibly.

I will be taking my NRA60 benefits next year, but I want to continue to add significant pension contributions (probably into a SIP,) and boost my later pension savings with the help of pension tax relief.

Would taking my section C NRA60 benefits possibly trigger the money purchase rules, which would reduce any other pension contributions to a limit of £10000?
I believe if any of the cash balance element (which requires limited options to be chosen, as part of taking the NRA60 benefits) is taken as taxable income, it would trigger the money purchase rules.
I did not want to take any of the cash balance at this time but, the only options available seem to be to transfer it to another pension provider.
Am I right in thinking that If I did take it as a tax free only lump sum however. It would not trigger the money purchase rules.

[RobertT]

The Cash Balance(DBCBS) can only be taken with other RMPP benefits, or else transferred out.
In practice, most of it will be with Age65.

So if you're only taking your Age60 next year, the DBCBS can be used to fund the tax free cash associated with any RMPP Age60 benefits you have. For most people, that's likely to be a small amount.
The remainder would then be left until you take your Age65 benefits.

As far as I'm aware, it's not possible to take any taxable cash from the DBCBS with Age60, so the Money Purchase Annual Allowance(MPAA) couldn't be triggered.

If you can take some DBCBS with Age60 but chose not to, all of it would then be left until you take your Age65, at which point any taxable amount would trigger the MPAA.
Otherwise, you can transfer it all out to a personal pension pending the £30k+ advice rules. If you did that, any withdrawals over the tax free amount would then trigger the MPAA.

[Flashman_]

Thanks Robert.
still a bit confused.
So the other part, of my NR60 from the RMPP is a defined contribution scheme and I will have no choice but to take that at the same time.(despite it being ridiculously small amount).
If that’s the case, I would be drawing income from that DC pension so would that not trigger the money purchase rules?

[RobertT]

If RM pension schemes are anything, they're confusing!

All of your Age60 and Age65 pension benefits(up to 2018) are defined benefit.
Some are paid by the RMSPS and some by the RMPP.
You must take all of your Age60 at the same time and all of your Age65 at the same time.

The DBCBS(2018-2024) comes under the RMPP and is a bit of an anomaly.
It's called the Defined Benefit Cash Balance Scheme and it requires IFA approval to transfer if it's value is £30k+, as with other DB pensions. But if tax is payable on it when you access it, that triggers the MPAA which usually only applies to DC schemes.

The DBCBS is usually used to fund the tax free lump sum when taking RMPP Age65 benefits, but in certain circumstances it can also be used to fund tax free cash with RMPP Age60 too.
None of it can be used to fund the tax free lump sum with any RMSPS benefits.

The MPAA is only triggered by taking taxable cash – NOT tax free cash!

Most of your Age60 benefits will be provided by the RMSPS, but a small amount might be from the RMPP too. That's because the RMPP are responsible for paying some inflationary increases to RMSPS benefits.

The amount the RMPP are responsible for is dependant on the rate of inflation between 2012 and when you take your benefits, or when you leave the company. As inflation changes each year, the amount of Age60 pension the RMPP are responsible for, also changes.
It's effectively a bonus amount which you might or might not get, depending on whether inflation is in your favour or not at the point of taking your Age60 benefits.

Therefore you might be able to use some of your DBCBS to fund the tax free lump sum with specifically your RMPP Age60 benefits. If so, you'll be told at the time.
If that is an option you'd be stupid not to take it, as it will be taxable with your Age65.

It's not possible to take any more DBCBS with Age60 than what's assigned to the RMPP element of those benefits, which for most people will be small.
So if you're only taking your Age60 benefits, you won't trigger the MPAA because you're not taking any taxable cash from the DBCBS.
But it's nailed on that you'll trigger it when you take your Age65.

I hope that makes sense.

[Flashman_]

Thanks so much for clearing that up. That has given me a better picture altogether.
I don’t know if its just our pensions which are so confusing or everyone gets these problems. (not helped by pension rules generally)
Thanks again.