Supplement & Lump Sum

[RobertT]

So, if this is right, my NRA60 pension is Annual pension £5,904.25 + £1,225.99 supplement + pension increase £1,597.17 = £8,727.41. If I multiply this by 20 I get £174,548.20. Then there's my most recent AVC figures £1,885.54 + £31,887.63 =£208,321.37. If I divide that by 4 = £52,080.34 for the lump sum. I haven't included any DBCBS fund. Doesn't sound right to me but I hope I'm right.

It looks about right to me!

The commutation rate for converting pension to lump sum is roughly 1:20, so based on your figures, if you want the maximum lump sum you'll be giving up around £1,000(very ballpark) per year from your NRA60 pension.

If you were able to take the maximum tax free lump sum from just your AVC's without commuting any pension, the £174,548 would represent 75% of NRA60 pot value and therefore the max tax free lump sum would be £58,182.

If the current AVC's close when the CDC scheme starts, it's also worth considering how your investments will perform thereafter.

Personally I stopped paying into Flexiplan about 2 years ago because I already had over 25% pot value. The plan at the time was to de-risk and sit on my gains, but my money has still increased by around 10% in that time, which is split between the Growth, Balanced & Cautious funds. Meaning a higher lump sum, although also meaning more tax to pay.

If the supplement is included in the lump sum calculation, in my case it'll mean keeping an extra £3k or so for myself instead of giving it to the taxman.

The DBCBS is attached to RMPP benefits accrued from 2012-2018 plus RMSPS benefits that continued to increase from 2012 onwards. So in practice most of your DBCBS pot will usually be taken with your NRA65.

[heapsy]

Cheers for that, the statements aren't the easiest to understand. I didn't include NRA60 FS addition, that was only £180 on the last statement. I was considering increasing my AVCs again, But I'm hoping to draw down once the new tax year kicks in, about 8 months after I've retired, so don't want to skew my figures too much. With a few months of contributions to go I've calculated just over another £3,600 will be added. Plus future growth. I'm happy to take a slightly reduced pension. With other investments, (shares and S & S ISA) and the NRA65, 67, and state pension to come, I don't think I'll starve.

[RobertT]

As long as you keep within the 25% pot value, all of your AVC's will be tax free and won't have any bearing on your other income.

You'll have £8,727 per year in NRA60 pension plus another £3,843 to draw down from your personal pension to stay within the personal tax allowance(currently £12,570). Not including any other income.
And you'll have the tax free cash from your AVC's and the personal pension on top!

So it sounds as if you have the ability, in theory at least, to increase your AVC pot by around £25k and still be able to take it all tax free at 60. Plus you won't have to give up as much, or any, pension.
But obviously with contributions into AVC's probably stopping fairly soon, that may not be possible in practice.

Your FS Addition will add another £3,600 onto your NRA60 pot value, so will increase your potential lump sum again!

It sounds as if you're in a good position to retire reasonably early and on a decent amount.

[heapsy]

That's the general idea. Rather go before I'm too knackered, or my head explodes.

[RobertT]

That's the general idea. Rather go before I'm too knackered, or my head explodes.

Shame more people don't think ahead. I know so many who have no choice but to work to SPA, or even longer.

[tractorboy2]

A different question on the supplement.
If you retire before SPA but after NRA does the supplement increase ?
After all you get less if taken early.

[RobertT]

A different question on the supplement.
If you retire before SPA but after NRA does the supplement increase ?
After all you get less if taken early.

We all know there is a reduction to the main pension when taking it before NRA. But there is no benefit to deferring it past NRA, you're just depriving yourself of what you're entitled to.

As far as I'm aware the same applies to the supplement.
So for example, if you draw your NRA60 at 60 but don't leave RM until 62, you won't get any more supplement than if you'd left at 60, you're just getting it for 2 years less.

Although it may be worth asking the PSC the question.

[tractorboy2]

A different question on the supplement.
If you retire before SPA but after NRA does the supplement increase ?
After all you get less if taken early.

We all know there is a reduction to the main pension when taking it before NRA. But there is no benefit to deferring it past NRA, you're just depriving yourself of what you're entitled to.

As far as I'm aware the same applies to the supplement.
So for example, if you draw your NRA60 at 60 but don't leave RM until 62, you won't get any more supplement than if you'd left at 60, you're just getting it for 2 years less.

Although it may be worth asking the PSC the question.

The biggest supplement comes with the RMSPS though as that is most of your NRA60 , so why ask the PSC unless they are responsible for paying it ?

[RobertT]

The biggest supplement comes with the RMSPS though as that is most of your NRA60 , so why ask the PSC unless they are responsible for paying it ?

Fair point, so ask Capita instead!

Although not everyone will necessarily have a bigger supplement from the RMSPS.
Someone joining RM in 2008 before the scheme closed to new entrants, would have 4 years with RMSPS and 6 years with RMPP + DBCBS. Which would equate to 2 years worth of NRA60 supplement and 8 years worth of NRA65 supplement.

[fly-catchers]

A different question on the supplement.
If you retire before SPA but after NRA does the supplement increase ?
After all you get less if taken early.

The Supplement increases each year by RPI if you are still working and the pension is deferred. Once you leave the pension supplement continues to increase by RPI. If have left and before you get to 65 the other NRA 65 supplement increases by CPI. The year you get it the increase changes back to RPI. Though the first year you get the pension it will depend where your birthday lies in relation to when the increase is added in April as to how much of that increase (if any) you get.

[billyliar1966]

In simple terms I am 57 in September. I am taking VR in two weeks. My total pension as of now is £9858, to be taken at 60 .I have an AVC of £14,000. My age 65 cash balance fund is £16,758. Age 65 CSDB is £2,143 with a supplement of £398. I will have savings of £140,000 if I sell my house. Partner also on around £9,000 a year. Outgoings of around £350 a week between us. In the simplest of words could anyone advise me if I am in a good position to never work again?

[NorthernBoy]

In simple terms I am 57 in September. I am taking VR in two weeks. My total pension as of now is £9858, to be taken at 60 .I have an AVC of £14,000. My age 65 cash balance fund is £16,758. Age 65 CSDB is £2,143 with a supplement of £398. I will have savings of £140,000 if I sell my house. Partner also on around £9,000 a year. Outgoings of around £350 a week between us. In the simplest of words could anyone advise me if I am in a good position to never work again?

Your combined pension incomes covers your £350 a week expenditure, so yes you would have enough to retire on those numbers.

I don’t understand why you would sell your house though, as you will need somewhere to live.

[postie2007]

Hi another question on this subject, I have been contacted by both RMPP + RMPS stating I am going to receive a supplement, so reading through this thread would I be right in thinking my initial total pension pot was not worked out including the supplement figure. If this was the case surely my tax free amount would have been more.
(Retired 12 weeks ago section c member)

[postie2007]

Hi another question on this subject, I have been contacted by both RMPP + RMPS stating I am going to receive a supplement, so reading through this thread would I be right in thinking my initial total pension pot was not worked out including the supplement figure. If this was the case surely my tax free amount would have been more.
(Retired 12 weeks ago section c member)

[RobertT]

In simple terms I am 57 in September. I am taking VR in two weeks. My total pension as of now is £9858, to be taken at 60 .I have an AVC of £14,000. My age 65 cash balance fund is £16,758. Age 65 CSDB is £2,143 with a supplement of £398. I will have savings of £140,000 if I sell my house. Partner also on around £9,000 a year. Outgoings of around £350 a week between us. In the simplest of words could anyone advise me if I am in a good position to never work again?

Personally I would say you'll be fine once you hit state pension age, but it'll be quite tight before then. Especially if the current £350 is just for basics(utilities, food, etc), or does it include other expenditure(hobbies, holidays, non essentials, etc)?

If you have £140k in the bank from a house sale, that will obviously be a nice cushion, but as Northernboy says, you have to live somewhere.
Renting in retirement isn't ideal.

The VR money, AVC's and Cash Balance will help, but if your basic income is only just enough to live on, they will inevitably get eaten into.

You might find that your outgoings change a bit in retirement.
Some costs may go down, but others could go up!
For example, if you're at home more often, your utility bills may increase.
Plus, you have to fill all that extra time somehow, and whatever you do will probably cost money in one way or another.

In short, I would say it can be done, but it won't be easy.