Options after cashing in pension.

[ihatedogs]

Bit of an hypothetical this but I'm struggling to get answers with random searching so thanks in advance for any help.
I'm coming up to 60, in the royal mail d c pension scheme. If I was to take the whole of my pension pot what are my options for a new private pension? Would I lose any further employer contributions? Is the £4k per annum limit based on my contributions alone or including employer contributions?
Would I be correct in saying I'd be excluded from any future RM pension schemes and would be looking at setting up my own private pension with an ndependant scheme?
Cheers.

[RobertT]

If you were to take all of your pension pot, the first 25% would be tax free and the remainder classed as income and potentially taxed in the normal way, depending on the amounts involved and any other income.
You could end up paying 40% tax on some of it.

You would still be entitled to join either the new CDC scheme or Nest, when they finally start.

Nest is a DC scheme.
But CDC is split into 2 parts, with the lump sum element(the DBLSS) being classed as Defined Benefit, which I believe would mean it wouldn't count towards the MPAA. Contributions into that are a total of 4.4% of pensionable pay, split 2% employee/2.4% RM.
The CDC pension itself is classed as a money purchase/DC scheme!

The Money Purchase Annual Allowance, means that if you access a DC pension you can then only pay £4,000 per year into another DC pension from then on and gain tax relief on those contributions. That does includes employer contributions!
However, those rules only apply to monies withdrawn over the 25% tax free amount. So you could just take the tax free cash and still not come under the MPAA rules.

This might give you more info on MPAA rules: https://www.moneyhelper.org.uk/en/pensi ... wance-mpaa

[ihatedogs]

Thanks Robert, a fountain of knowledge as always.
A follow up question, if I take the 25% tax free lump sum from my DC pension, can I just continue to contribute to it?

[RobertT]

Thanks Robert, a fountain of knowledge as always.
A follow up question, if I take the 25% tax free lump sum from my DC pension, can I just continue to contribute to it?

Yes you can.

[ihatedogs]

Cheers.

[ihatedogs]

Final question ( I promise) if I was to take the 25% tax free and continue to pay into my DC pension can I presume there'd be no further tax free option when I retire & take my pension in full?
Thanks.

[RobertT]

Final question ( I promise) if I was to take the 25% tax free and continue to pay into my DC pension can I presume there'd be no further tax free option when I retire & take my pension in full?
Thanks.

As far as I'm aware, the answer to that is no. Although to be honest I'm not 100% sure.

There are a few other things that you might need to know:

The RMDCP will only be open until the CDC and Nest pensions start, which is planned from late 2022 or early 2023. You won't be able to pay any more into the RMDCP from then on, unless you transfer out to another DC pension provider.

Not all pensions allow the full freedoms of drawdown, etc and you may have to transfer out to utilise them.

More DC info and what you can do with your money can be found here: https://www.moneyhelper.org.uk/en/pensi ... on-schemes

[Jaggs]

Final question ( I promise) if I was to take the 25% tax free and continue to pay into my DC pension can I presume there'd be no further tax free option when I retire & take my pension in full?
Thanks.

This is where it can start getting complicated. To take 25% of your total pension pot tax free you would have to crystallise the other 75% into a drawdown plan. As long as you don't take any taxable income from what is transferred into the drawdown account you can continue contributing to the pre retirement part of the plan. Say you then built up £25,000 in your pre retirement by continuing to contribute you can take 25% of that tax free when you crystallise it along as you are still within the lifetime allowance.