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Pension /redundancy question

06 Feb 2020, 21:41

Apparently if you take both your pensions or just your NRA65 pension, you no longer have access to Voluntary Redundancy or ill health retirement?
I've not read this on this forum but it's on the pensions booklet so must be true?
Can anyone confirm as I wouldn't want to take pension/s if I were to miss out on a vr payment!
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Pension /redundancy question

07 Feb 2020, 14:58

As far as I'm aware the 'flexible retirement' booklet you're referring to is talking about 'IHR with immediate payment of pension' and Early Voluntary Retirement, which used to be a form of redundancy.
Since the closure to future accrual of the RMPP, neither exist anymore!

IHR with lump sum(34 weeks plus PILON) and Voluntary Redundancy(up to 104 weeks) are still potentially payable in certain circumstances. But by all accounts RM are not as keen to pay people off as you used to be.

Pension /redundancy question

07 Feb 2020, 16:15

Thanks as always Robert.
As you say they haven't seemed that keen on offering VRs but having read that they have done that in a mail centre recently by executive action perhaps there is a possibility now if they're looking to reduce the wage bill...
I also enquired about the current cash balance scheme and apparently taking this early doesn't reduce by 5% a year like the other pensions.
They did say that the effect of this to the lump sum is minimal but is used to top up the lower pension nearer to the higher pension (rmsps) if that makes any sense!
It may be possible to take it in addition to the lump sum but they mentioned it being taxed and something about crystalised?

Pension /redundancy question

07 Feb 2020, 17:21

TheStrangler wrote:Thanks as always Robert.
As you say they haven't seemed that keen on offering VRs but having read that they have done that in a mail centre recently by executive action perhaps there is a possibility now if they're looking to reduce the wage bill...

VR's are always a possibility and personally I'd be very interested, but I think they'll go for the cheaper option first wherever they can.

I also enquired about the current cash balance scheme and apparently taking this early doesn't reduce by 5% a year like the other pensions.

Which considering it is essentially the same as AVC's(it funds the lump sum), that's probably how it should be.

They did say that the effect of this to the lump sum is minimal but is used to top up the lower pension nearer to the higher pension (rmsps) if that makes any sense!
It may be possible to take it in addition to the lump sum but they mentioned it being taxed and something about crystalised?

Some peoples 'higher pension' might actually be the RMPP rather than the RMSPS, depending on their length of service.

If your tax free cash either from the standard lump sum(section A/B), the Cash Balance or AVC's, or a mixture of all three, total more than 25% of your benefits, then tax will be payable on anything over.
Once the tax free cash has been taken from the Cash Balance and/or AVC's, your funds will have been crystalised.

In practice, what an individual can take from their pension and whether they pay tax on it, will vary from person to person to one degree or another.

Pension /redundancy question

10 Feb 2020, 12:16

Was just wondering with regard to the taxable element of the section A/B lump sum / AVC / Cash Balance lump sums can you reduce the chance of paying tax by taking your section A/B benefits purely as a pension (i.e. no lump sum) . If this was an option then presumably your pension element for section A/B would increase?

Pension /redundancy question

10 Feb 2020, 21:18

GW wrote:Was just wondering with regard to the taxable element of the section A/B lump sum / AVC / Cash Balance lump sums can you reduce the chance of paying tax by taking your section A/B benefits purely as a pension (i.e. no lump sum) . If this was an option then presumably your pension element for section A/B would increase?


Your lump sum is tax free. Unless that is, your AVCs and Cash Balance scheme are more than 25% of the total pension.

Pension /redundancy question

10 Feb 2020, 21:19

GW wrote:Was just wondering with regard to the taxable element of the section A/B lump sum / AVC / Cash Balance lump sums can you reduce the chance of paying tax by taking your section A/B benefits purely as a pension (i.e. no lump sum) . If this was an option then presumably your pension element for section A/B would increase?


Your lump sum is tax free. Unless that is, your AVCs and Cash Balance scheme are more than 25% of the total pension.

Pension /redundancy question

11 Feb 2020, 04:09

GW wrote:Was just wondering with regard to the taxable element of the section A/B lump sum / AVC / Cash Balance lump sums can you reduce the chance of paying tax by taking your section A/B benefits purely as a pension (i.e. no lump sum) . If this was an option then presumably your pension element for section A/B would increase?

As a section C member myself I'm not completely au fait with section A/B, but I seem to remember there used to an option to give up some or all of the standard lump sum in return for more pension.
Although that doesn't seem to be mentioned in the literature anymore, so I'm unsure whether it's still an option or not.

You also have the choice to buy an annuity with some or all of your AVC funds.

Pension /redundancy question

11 Feb 2020, 07:39

heapsy wrote:
GW wrote:Was just wondering with regard to the taxable element of the section A/B lump sum / AVC / Cash Balance lump sums can you reduce the chance of paying tax by taking your section A/B benefits purely as a pension (i.e. no lump sum) . If this was an option then presumably your pension element for section A/B would increase?


Your lump sum is tax free. Unless that is, your AVCs and Cash Balance scheme are more than 25% of the total pension.


Not taking the lump sum would increase the possibility of paying tax, not decrease it. All depends on your figures. The current tax code is 12500. It would also depend on whether you are retiring or continuing to work. Retiring from RM and then working part time, possibly on a lower rate of pay, may mean your RM pension could be tax free, if the combined total of earnings and pension are below £12500. Yo didn't give enough info regrading your intentions in your original post.

Pension /redundancy question

11 Feb 2020, 11:15

I'm Section B and am just going through my NRA60 options. I was given 3 options as far as lump sum which were 1) standard lump sum, 2) No lump sum or 3) 25% max lump sum. All lump sums are tax free. Whatever your lump sum choice will determine what your regular pension payments will be. If carrying on working then you really need a lower pension as you will be taxed at BR 20% so the higher your pension the more tax you will pay so a complete no-brainer as far as I'm concerned. Tax free dosh wins every time.

Pension /redundancy question

11 Feb 2020, 13:45

Factoring in the DBCBS and AVC's then it's possible that you'll have lump sums of over 25%, in which case income tax would then be payable on the excess.

Pension /redundancy question

11 Feb 2020, 17:30

RobertT wrote:Factoring in the DBCBS and AVC's then it's possible that you'll have lump sums of over 25%, in which case income tax would then be payable on the excess.


Yep that needs to be factored in if it applies but for me personally I'm not taking the cash balance this time and have no AVC's yet but intend to start them building up my 65 pension. For me it was just a case of deciding whether to take the 25% of my pot as a tax free lump sum now or go for a lower lump sum and a higher pension.

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