Cash balance and nra 65

[chrisrct]

Hi there, about to receive my nra 65 options ,and was wondering if the cash balance money is added to the pension pot before working out the 25% tax free amount, or is it a stand alone lump sum, thank you for any replies.

[RobertT]

The DBCBS is 'attached' to the RMPP element of your NRA65 benefits, which is the pension you accrued from 2012-2018. The remaining two years of NRA65(2010-2012) is paid for by the RMSPS and doesn't come into the DBCBS equation.

You don't say which section you're in, so the answer to how much is tax free will vary.
But the DBCBS was initially designed to provide the lump sum, so the need to give up some pension to get one, was reduced or eliminated altogether. Particularly useful for section C members, as they don't get a lump sum as standard.

It is possible to take the maximum lump sum from the main NRA65 benefits, giving up some pension as required, and then take the DBCBS as a separate lump sum. But only the first 25% of your DBCBS pot would then be guaranteed to be tax free, with the remainder being classed as income.

Another option would be to transfer the DBCBS out separately to another pension arrangement.

[chrisrct]

Thanks for explanation Robert,I am in section c, started 1990

[Jack1960]

I got same option, i ended up taking max pension with no lump sum and then took 18500 tax free from my cash balance leaving 4500 to be taken.
The first 25 per cent of that s tax free ....i think !! Wont get that for couple of months .
I

[RobertT]

I got same option, i ended up taking max pension with no lump sum and then took 18500 tax free from my cash balance leaving 4500 to be taken.
The first 25 per cent of that s tax free ....i think !! Wont get that for couple of months .

Yes I think you're right with that!

The excess is paid as a Uncrystallised Funds Pension Lump Sum. Which means the first 25% of that excess, £4,500 in your case, is also tax free, with the remainder being classed as income and coming under normal PAYE tax rules.

[Jack1960]

I got same option, i ended up taking max pension with no lump sum and then took 18500 tax free from my cash balance leaving 4500 to be taken.
The first 25 per cent of that s tax free ....i think !! Wont get that for couple of months .

Yes I think you're right with that!

The excess is paid as a Uncrystallised Funds Pension Lump Sum. Which means the first 25% of that excess, £4,500 in your case, is also tax free, with the remainder being classed as income and coming under normal PAYE tax rules.

Yes i learnt all that from some bloke on here ...Robert T

[RobertT]

[tractorboy2]

I got same option, i ended up taking max pension with no lump sum and then took 18500 tax free from my cash balance leaving 4500 to be taken.
The first 25 per cent of that s tax free ....i think !! Wont get that for couple of months .

Yes I think you're right with that!

The excess is paid as a Uncrystallised Funds Pension Lump Sum. Which means the first 25% of that excess, £4,500 in your case, is also tax free, with the remainder being classed as income and coming under normal PAYE tax rules.

Instead of starting a new topic , thought I'd use this thread as it would highlight my question better.

In the scenario above the amount of money taxed on is £3,375 , my question is would all other income be taxed as well if this amount pushed you over the £12,570 annual allowance ?

[RobertT]

Any income over £12,570 is taxed at 20% and any income over £50,270 is taxed at 40%, just as it with your wages. And pension income counts as earnings for tax purposes!

Therefore, in the above scenario the £3,375 could all be tax free or it could all be taxed at 40% or anything in between, depending on what that persons earnings are in total.

*Some people do have specific tax codes individual to them or their work. For example: RM employees have the uniform cleaning allowance, which increases the amount you can earn before you pay tax.

[NWpostie]

It could be tax effective to take your NRA60 and NRA65 separately in separate tax years, you should max your 25% tax free lump sum and stay under the 40% bracket.

[tractorboy2]

I asked the question as I no longer work and only have my pension and any interest I get on savings.
I'm just thinking ahead to when I get my NRA65 benefits which isn't for another 28 or so months.

Any chance the personal allowance may change in that time ?

[RobertT]

I asked the question as I no longer work and only have my pension and any interest I get on savings.
I'm just thinking ahead to when I get my NRA65 benefits which isn't for another 16 or so months.

Any chance the personal allowance may change in that time ?

It's currently set to be frozen until April 2028, but who knows what the new government might do?
Keep an eye out for the Autumn statement, with a bit of luck Rachel Reeves might decide to ignore Labour's election pledges on tax and increase it.