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Pension Supplement and Lump Sum Effect

14 Nov 2017, 17:38

Just a point of information re what happens if you finish work AFTER you have taken your first pension payment.

I am 60 next April and have been toying with staying on possibly an extra month so as not to dip into more savings than I need to as I am paid weekly but pensions are paid at the end of each month as I understand it. The trouble is that the Pension Supplement would not be paid "If you remain in Company employment or if you are re-employed" (taken from section C booklet), so. in my case, April's end-of-month pension payment would not include the pension supplement, should I stay on, but the May payment would - so far so good.

For the lump sum entitlement (maximum tax-free of RM pension pot inc AVC), the pension supplement would be included in the calculation if you are entitled to draw it i.e. if you leave service up to and including pension day payment (-1 day) according to the email response I got today. But if you leave service after you have taken your first pension payment then the value of your RM pension pot will not include the pension supplement and will not be revised once the supplement is payable. Worth bearing in mind for anyone in a similar situation to myself.

Am now thinking about increase my AVC payments into Zurich for the remaining months I have in RM to maximise my tax-free lumper and not to delay retirement past my 60th and enjoy spring and early summer. :thumbup


Pension Supplement and Lump Sum Effect

14 Nov 2017, 19:27

An interesting post. So, for the sake of working on a bit longer, you end up being penalised long term. Barely worth it really.

Pension Supplement and Lump Sum Effect

14 Nov 2017, 22:00

heapsy wrote:An interesting post. So, for the sake of working on a bit longer, you end up being penalised long term. Barely worth it really.


heapsy, if you are section C member, you would only lose out on the the pension supplement until such time as you ceased working for RM (assuming you've taken all pension at 60 or whenever) but you would obviously gain much more in wages earned than supplement not paid. However the tax on your pension would probably be at your marginal rate (20%) and you might not be able to take as a big a chunk from your pension pot tax-free.

I've done a reasonably detailed analysis for my particular set of circumstances and I do know that there might be a slight risk that my current AVC's would be worth more than 25% of my calculated pension pot if the supplement is excluded. Obviously there are assumptions about my AVC's at retirement - what they are invested in, how much I continue to invest and whether or not they appreciate in value over the next 4 months.

I now know that it is making it much more likely that I will retire very very close to my 60th :thumbup

Pension Supplement and Lump Sum Effect

15 Nov 2017, 21:25

BeamishStout- Have you been given an actual pension supplement figure? So far with my paperwork they only could quote a small supplement amount I actually will get from a pension I transfered to RM rather than the RM actually one! Also I am still puzzling as to whether if you take the NRA65 early that supplement is reduced by 5% per year or more. The online calculator while it was still there on the RM pension website reduced the 65 supplement part far more than 25% for taking it 5 years early. But the Pension centre did suggest it would be 5% per year which I hope it is. As taking it 5 years early would actually give you more money than leaving it till 65 and getting just one year of it before the state pension kicks in!

Pension Supplement and Lump Sum Effect

15 Nov 2017, 22:21

fly-catchers wrote:BeamishStout- Have you been given an actual pension supplement figure? So far with my paperwork they only could quote a small supplement amount I actually will get from a pension I transfered to RM rather than the RM actually one! Also I am still puzzling as to whether if you take the NRA65 early that supplement is reduced by 5% per year or more. The online calculator while it was still there on the RM pension website reduced the 65 supplement part far more than 25% for taking it 5 years early. But the Pension centre did suggest it would be 5% per year which I hope it is. As taking it 5 years early would actually give you more money than leaving it till 65 and getting just one year of it before the state pension kicks in!


Not yet - very much guesswork (the NRA65 part) along the lines you have suggested. I will report back on what the actual % reduction on the supplement is (the NRA65 component) once I get numbers.

Obviously the NRA65 pension would be expected to be 25% higher if I took it at 65 so you need to factor this in and ultimately the money you get from your pension depends on how long you live for :hmmmm

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