RMSPS NRA60 Pension questions

[Redbull210]

Dear all,

I have a RMSPS NRA60 pension (final salary) commenced 1987 to 2005 (when I left the Post Office)

This year I turn 60 and can take the pension (either Monthly amount or Tax free lump sum + a reduced monthly amount). I have a number of questions and I have tried both on the phone and via written e-mails to get answers from the Royal Mail pension office but they seem incapable of fully answering the questions.

Over the telephone, the chap started to reply to a question with "I think", which didn't fill me with confidence so I resorted to putting my questions in writing via e-mail. Firstly they take for ever to reply, then when they do reply they hardly answer the question, then they even sent me a letter saying e-mail is not a secure form of communication and wanted me to complete and sign a form and post back to them to say I was okay with them communicating about my pension via e-mail, to me it just seems a delaying tactic!!

Anyway the questions I have are below, if anyone has experience of this I would be very grateful (failing that I'll have to go see a financial advisor)

1. Just because I turn 60 this year, do I have to physically take the pension? I appreciate it does not accumulate, but can I just not take the payments until later (3 years or so later)

2. If I decide to take the tax free 25% lump sum, can I not take the monthly pension payments (again put those off for 3 years or so)

3. The reason I ask about that is due to the MPAA trigger (money purchase Annual Allowance), which if triggered means you can only pay in up to £10,000 into another pension scheme and get tax benefits. (I have another job where I wish to boost my new pension via AVC but this would not work as desired it MPAA was triggered by having to take the Royal Mail pension this year.

Royal Mail have just said when you turn 60 you have to take the pension and cannot defer it. Neither have they addressed the MPAA questions!

Thanks in advance for your help

[RobertT]

1. Just because I turn 60 this year, do I have to physically take the pension? I appreciate it does not accumulate, but can I just not take the payments until later (3 years or so later)

Technically I don't think you have to take it, you could just not send your forms back and in doing so, you're effectively deferring it.
But you'll lose out on 3 years worth of payments – they will NOT be backdated!
So there's very little point as you're just depriving yourself of money for no reason.

2. If I decide to take the tax free 25% lump sum, can I not take the monthly pension payments (again put those off for 3 years or so)

You have to take both at the same time.

3. The reason I ask about that is due to the MPAA trigger (money purchase Annual Allowance), which if triggered means you can only pay in up to £10,000 into another pension scheme and get tax benefits. (I have another job where I wish to boost my new pension via AVC but this would not work as desired it MPAA was triggered by having to take the Royal Mail pension this year.

Your RM pension is a defined benefit scheme and does not trigger the MPAA. you only trigger that when you take the taxable element of a defined contribution/money purchase pension.

[Redbull210]

Hi Robert, thank you for taking the time to reply and offer your advice, they're more in your replies than I've actually had from the RM pension department!

What I don't want to do is get caught out by doing something incorrect, for instance if I don't return the forms, sure I won't start taking the pension, but they might have some rule which says if you don't take it at a certain time you forfeit the pension! I'm not suggesting that is the case but because I can't get any answers to those type of questions from them directly I'm exploring other avenues.

The reason I don't want to take any portion of the pension which triggers MPAA is because I'm in a fortunate position with a new employer where via salary sacrifice I can put large amounts into a new pension, take the tax benefits associated with that and also put in my annual bonus into it, which is what I'd like to do for the next 3 years before finally retiring and not working at all.

I was also of the belief that taking just the 25% tax free lump sum amount would not trigger MPAA, however I think you refer to it below saying both have to be taken together which would then limit what I can pay into my new pension and also attract 40% tax from my RM monthly pension, which is also what I'm trying to avoid.

Your answer to point 3 is kind of answered by question 2 as you're suggesting the 2 elements cannot be separated, that being the case MPAA would be triggered. The only way around that is is I can say I do not wish to take any part of my pension until say 3 years later, yes I lose money from the monthly part of it but I get to pay in substantial amounts (more than 10K per years) into a new pension and not fall into a 40% income tax bracket.

Thanks once again for your input, it's much appreciated.

[RobertT]

I believe there is a rule which says if you don't take your RM pension within 6 years of it's due date, you could potentially forfeit it.

You seem to be misunderstanding the most important part of my reply, which is:

The MPAA only applies when you take anything that's taxable from a DC pension.
Your RM pension is a DB scheme, therefore the MPAA doesn't apply when you take it.
So you can still put in as much as you earn, up to £60k, into your current workplace pension.

More info here: https://www.moneyhelper.org.uk/en/pensi ... wance-mpaa

It will be taxable, but I can't see any logical reason not to take your RM pension at 60!

Perhaps it might actually enable you to put more into your current scheme?

[Redbull210]

Hi Robert,

Thanks for that and if the 6 year rule is correct, that would be ideal.

As for the Defined Benefits Pension, I am aware that it is, however from the research I've been getting from the internet, I'm lead to believe the the 25% tax free element would not trigger MPAA, however the monthly amounts are taxable (income) and so would trigger MPA.

This is the element I'm having difficulty clarifying and getting an accurate answer to, however you have been the most help so far, so thank you.

If what you say is correct, that would mean I can take my 25% tax free lump sum as well as the monthly amounts, neither of these are taxable!? is that what you are say? that even the monthly amount is not taxable (it would be over the 12,570 mark)?

If so then that's great I would be able to take it and continue to pay into my current pension scheme. I have a funny feeling that the Government is unlikely to allow that to be the case, but I hope I'm wrong about that.

I will look into Defined pension more and continue to try and get some proper answers from Royal mail. Thanks

[RobertT]

As for the Defined Benefits Pension, I am aware that it is, however from the research I've been getting from the internet, I'm lead to believe the the 25% tax free element would not trigger MPAA, however the monthly amounts are taxable (income) and so would trigger MPA.

This is the element I'm having difficulty clarifying and getting an accurate answer to, however you have been the most help so far, so thank you.

I've had a Google and everything I've seen on the web confirms that taking a DB pension doesn't trigger the MPAA.
It doesn't matter whether the income is taxable or not.
The MPAA only becomes an issue when accessing the taxable element of a DC pension!

If what you say is correct, that would mean I can take my 25% tax free lump sum as well as the monthly amounts, neither of these are taxable!? is that what you are say? that even the monthly amount is not taxable (it would be over the 12,570 mark)?

The 25% lump sum will be tax free.
The monthly income will be added to your other wages and taxed accordingly.
Based on the standard Personal Tax Allowance(it can sometimes vary based on the individuals circumstances), all income over £12,570 is taxed at 20%, with any income over £50,270 taxed at 40%.

If you're close to one of those thresholds, your plan to pay extra into your pension can help to keep you in the lower tax band.

If so then that's great I would be able to take it and continue to pay into my current pension scheme. I have a funny feeling that the Government is unlikely to allow that to be the case, but I hope I'm wrong about that.

The link I provided above is for a government advice service.

[Redbull210]

Thanks very Much Robert, the info you've provided has been most helpful.