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Help regarding NRA60/65

03 Sep 2019, 21:22

Ok, ex postie here, I left Royal Mail in 2012 after eight years service, I am now 56 work part time, and was looking into dipping into my old Royal Mail pension, I received a form but I have no idea what it all really means in layman terms, I am looking at option 2 on both, .... NRA60 " take a reduced retirement pension of £1,169 per annum and maximum tax-free PCLS £7,798... does this mean I will get the £7798 now and would it effect my part time earnings, I don't pay tax now.. and what's the per annum bit?..... my NRA65 options are £205 per annum and PCLS is just £1,372, can someone explain in layman terms what it means.... many thanks

Help regarding NRA60/65

04 Sep 2019, 03:27

If you take your RM pension/s before Normal Retirement Age(NRA) they get reduced by 5% per year. So taking both at exactly age 56 for example, means a 20% reduction on your NRA60 and a 45% hit on your NRA65.
Generally and based on averages, it's best to leave them until NRA to get full value for money.
But ultimately it's your choice!

The Pension Commencement Lump Sum(PCLS) is tax free and therefore doesn't count towards your income for tax purposes.

The pension itself will be classed as income and potentially taxed, but that would depend on how much total income you have.

In practice anything you earn over the Personal Tax Allowance will be taxable, and that figure currently stands at £12,500 per year.
So if you take all of your RM pension of £1,374 and add that to your current gross earnings, you'll know if you'll pay tax or not.
Income tax is payable at 20%, but there is no National Insurance to pay on pension income.

Sometimes income tax is automatically taken off by an employer or pension provider when it shouldn't be. If that's the case it should sort it self out over time, or if not, get in touch with HMRC and tell them and they'll either issue a refund or change your tax code accordingly. https://www.gov.uk/claim-tax-refund

Per annum just means per year, although you actually get your RM pension paid monthly. So in your case it should be £114.50 gross per month in total. Which will go up by inflation each year.

Help regarding NRA60/65

04 Sep 2019, 08:11

RobertT wrote:If you take your RM pension/s before Normal Retirement Age(NRA) they get reduced by 5% per year. So taking both at exactly age 56 for example, means a 20% reduction on your NRA60 and a 45% hit on your NRA65.
Generally and based on averages, it's best to leave them until NRA to get full value for money.
But ultimately it's your choice!

The Pension Commencement Lump Sum(PCLS) is tax free and therefore doesn't count towards your income for tax purposes.

The pension itself will be classed as income and potentially taxed, but that would depend on how much total income you have.

In practice anything you earn over the Personal Tax Allowance will be taxable, and that figure currently stands at £12,500 per year.
So if you take all of your RM pension of £1,374 and add that to your current gross earnings, you'll know if you'll pay tax or not.
Income tax is payable at 20%, but there is no National Insurance to pay on pension income.

Sometimes income tax is automatically taken off by an employer or pension provider when it shouldn't be. If that's the case it should sort it self out over time, or if not, get in touch with HMRC and tell them and they'll either issue a refund or change your tax code accordingly. https://www.gov.uk/claim-tax-refund

Per annum just means per year, although you actually get your RM pension paid monthly. So in your case it should be £114.50 gross per month in total. Which will go up by inflation each year.



Thanks Robertt, that is really helpfull, ..... so if I just go for the NRA 60, I would get the £7,798 - 20%, in one lump sum? and would any of this effect me when it comes to my normal state pension at 65?

Help regarding NRA60/65

04 Sep 2019, 13:51

malnuman wrote:Thanks Robertt, that is really helpfull, ..... so if I just go for the NRA 60, I would get the £7,798 - 20%, in one lump sum?

I assume you've asked for a quote for talking your pension/s early, therefore the 5% per year reductions have already been factored in. So if you just take your NRA60 you would get a tax free lump sum of £7,798. Plus a pension of £1,169 per year, some of which might be taxable depending on your total income, as explained above.

and would any of this effect me when it comes to my normal state pension at 65?

Your lump sums shouldn't normally affect anything once you've reached state pension age.

But your income could still potentially be taxed in the same way as it is now. So anything over the personal tax allowance will be taxed at 20%.

If you're currently 56, your state pension age is actually 67. You can check your self here: https://www.gov.uk/state-pension-age

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