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Pension letter update today 4th Sept 2019 (my own queries, not a general update)

04 Sep 2019, 11:13

I received a letter fron HR (Jon Millidge and Terry Pullinger).
I wrote back to Jon Millidge, as I think the booklet was scantily and poorly written along with the letter.
It talks about not being able to take all of our cash benefits under the cash balance scheme, tax free with our NRA 60.
However it makes no mention of what happens for those who wish to take it all at 60 and pay tax on the cash balance if required.
It also fails to mention that every one can take all of their benefits at 55 with reductions.
I intend to take every thing at 60.
NRA 60 and all of my cash in the cash balance scheme (taxable if need be)
NRA 65 at 60 with reductions.
I await his reply.


Pension letter update today 4th Sept 2019 (my own queries, not a general update)

04 Sep 2019, 15:09

I think the aim was to make things easier for people to understand.

Whether they've achieved that is probably a matter for the individual, but if they included every scenario, the booklet and letter would have been much bigger/longer and harder for people to get their heads round.

Pension letter update today 4th Sept 2019 (my own queries, not a general update)

04 Sep 2019, 18:31

RobertT wrote:I think the aim was to make things easier for people to understand.

Whether they've achieved that is probably a matter for the individual, but if they included every scenario, the booklet and letter would have been much bigger/longer and harder for people to get their heads round.

Thanks for your reply Robert. I presume I will still be able to take every thing, but may pay some tax on the cash balance scheme.
I pay 20% and earn before pension deductions about £37,000.
I aim to retire in 1stFeb 2021, at the end of the tax year. I am guessing I will pay tax on a bit of my cash balance scheme if it takes me over the 25% allowance, perhaps between £2000 at 20% or £4000 at 40%. I am not sure if it will? Whether that bit is at 20% or 40% I don't know and am not sure if I would get it back the next year.
So under the existing rules I may pay between £2000 and £4000 tax.

Pension letter update today 4th Sept 2019 (my own queries, not a general update)

04 Sep 2019, 19:02

You will still be able to take everything at 60, it's just that the Cash Balance(DBCBS) can only be used to fund the tax free lump sum associated with your RMPP(post 2012) benefits. Therefore you will pay tax on any excess amount in your DBCBS pot once you've used up the 25% tax free limit. Any AVC's would also need to be factored in.

Without knowing any specifics it's virtually impossible to say whether you'll pay tax or not, but any earnings over £50,000 in any financial year will be taxed at 40%. Everything between £12,500 and £50,000 is 20%.

Any tax free cash you take from your pension, either from the main scheme or the DBCBS or AVC's won't count as earnings. But anything over 25% will, along with all earnings from RM or any other job you may have. Aswell as your pension income.

To avoid tax, it may be wiser to retire shortly after the start of the tax year, so after 6th April. But as ever, individual circumstances will come into it to one degree or another.

Pension letter update today 4th Sept 2019 (my own queries, not a general update)

04 Sep 2019, 19:20

RobertT wrote:You will still be able to take everything at 60, it's just that the Cash Balance(DBCBS) can only be used to fund the tax free lump sum associated with your RMPP(post 2012) benefits. Therefore you will pay tax on any excess amount in your DBCBS pot once you've used up the 25% tax free limit. Any AVC's would also need to be factored in.

Without knowing any specifics it's virtually impossible to say whether you'll pay tax or not, but any earnings over £50,000 in any financial year will be taxed at 40%. Everything between £12,500 and £50,000 is 20%.

Any tax free cash you take from your pension, either from the main scheme or the DBCBS or AVC's won't count as earnings. But anything over 25% will, along with all earnings from RM or any other job you may have. Aswell as your pension income.

To avoid tax, it may be wiser to retire shortly after the start of the tax year, so after 6th April. But as ever, individual circumstances will come into it to one degree or another.
thanks for your reply
My NRA 60 will be around £8200 (15% reduction for max lump sum) pension and the max lump £54000. My NRA60 taken early with 40% reduction for taking max lump (15%) and 5 x 5% £1737 pension and max lump of around £9000. Add to that if this temp scheme lasts till I leave, around 3 years of dbcbs = approx £14000.
Robert, I don't know if that helps you help me, knowing my circumstances.
Thanks.

Pension letter update today 4th Sept 2019 (my own queries, not a general update)

05 Sep 2019, 04:27

stephen500 wrote: thanks for your reply
My NRA 60 will be around £8200 (15% reduction for max lump sum) pension and the max lump £54000. My NRA60 taken early with 40% reduction for taking max lump (15%) and 5 x 5% £1737 pension and max lump of around £9000. Add to that if this temp scheme lasts till I leave, around 3 years of dbcbs = approx £14000.
Robert, I don't know if that helps you help me, knowing my circumstances.
Thanks.

I'm no expert on section B, but I think you're looking at things in slightly the wrong way with regards to the DBCBS in particular and possibly the main benefits too?

You're working out what you might get from your NRA65 then adding on the DBCBS. But in reality the DBCBS is factored into the overall benefit calculation.

In practice that means the DBCBS will be used to fund the tax free lump sum associated with your RMPP(post 20102) benefits first, with any excess being taxed. Then the rest of your maximum 25% tax free allowance will be taken from your main benefits. Meaning your main pension income won't decrease by as much.

So overall you should get both a higher tax free lump sum and a higher pension from your NRA65.

You may find page 12 of your plan guide explains more.

From the figures you've quoted, it doesn't sound to me as if any income will be liable for 40% tax.

Pension letter update today 4th Sept 2019 (my own queries, not a general update)

05 Sep 2019, 10:58

RobertT wrote:
stephen500 wrote: thanks for your reply
My NRA 60 will be around £8200 (15% reduction for max lump sum) pension and the max lump £54000. My NRA60 taken early with 40% reduction for taking max lump (15%) and 5 x 5% £1737 pension and max lump of around £9000. Add to that if this temp scheme lasts till I leave, around 3 years of dbcbs = approx £14000.
Robert, I don't know if that helps you help me, knowing my circumstances.
Thanks.

I'm no expert on section B, but I think you're looking at things in slightly the wrong way with regards to the DBCBS in particular and possibly the main benefits too?

You're working out what you might get from your NRA65 then adding on the DBCBS. But in reality the DBCBS is factored into the overall benefit calculation.

In practice that means the DBCBS will be used to fund the tax free lump sum associated with your RMPP(post 20102) benefits first, with any excess being taxed. Then the rest of your maximum 25% tax free allowance will be taken from your main benefits. Meaning your main pension income won't decrease by as much.

So overall you should get both a higher tax free lump sum and a higher pension from your NRA65.

You may find page 12 of your plan guide explains more.

From the figures you've quoted, it doesn't sound to me as if any income will be liable for 40% tax.

Thank you, Robert, as long as I can take it all at 60 with appropriate reductions of NRA 65, I don't mind paying some tax on any amount over the 25% tax free allowance. So I should be able to take it all, but may pay a little tax.
,

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