Cash balance fund

[rogersh]

What happens to our 6 years of contributions,does it get invested into the new scheme in October?

The DBCBS is part of the RMPP and used to fund your tax free cash when you take NRA65 benefits - slightly different for section F members. That's always been the case and probably always will be.

Robert, when you say "slightly different for section F members" what does that mean?
I am aware you can transfer out to another private pension & there is not yet (if ever) an option to transfer to the new collective pension.

[RobertT]

What happens to our 6 years of contributions,does it get invested into the new scheme in October?

The DBCBS is part of the RMPP and used to fund your tax free cash when you take NRA65 benefits - slightly different for section F members. That's always been the case and probably always will be.

Robert, when you say "slightly different for section F members" what does that mean?
I am aware you can transfer out to another private pension & there is not yet (if ever) an option to transfer to the new collective pension.

Section A, B & C members can use the DBCBS to fund some or potentially all, of their tax free lump sum when taking their NRA65 benefits. It forms part of their overall RMPP pot.
The downside of the DBCBS is that it's been going for longer than planned and everyone's Cash Balance is worth more than originally expected, so tax is likely to be an issue, particularly for section A/B members because they already get a lump sum as standard.

Section F members have no other RMPP benefits and can take the DBCBS as a stand alone lump sum, with the first 25% being tax free.

All RMPP members also have the choice to transfer the DBCBS out to a personal pension, which will give them different options with how they access the money(drawdown/annuity). That might be more tax efficient for some too.

[rogersh]

Thanks Robert
For someone in section F asking if the option is taken to leave the money, accrued in the cash balance scheme, where it is.
The info says;
"You and Royal Mail will stop contributing to this plan, but increases will be awarded as they are now"

Do you know what the increases are?

[RobertT]

Thanks Robert
For someone in section F asking if the option is taken to leave the money, accrued in the cash balance scheme, where it is.
The info says;
"You and Royal Mail will stop contributing to this plan, but increases will be awarded as they are now"

Do you know what the increases are?

The annual increases are discretionary and decided by RM rather than the trustee, but once added they're guaranteed. They're added a year in arrears, so 2024's increase was applied to 2023's balance.

They're awarded in April and aim to at least match the rate of CPI in the previous September.
I'm sad enough to have made a note of what they've been so far, with CPI in brackets:

2020 – 3.7%(1.7%)
2021 – 1.7%(0.5%)
2022 – 4.6%(3.1%)
2023 – 11.4%(10.1%)
2024 – 6.7%(6.7%)

See the RMPP website and the 'guide to benefits' for more info.

The lump sum section of the new RMCPP(the DBLS) will be run on a similar basis to the DBCBS.

[rogersh]

Thanks again Robert for that information - I will pass it on to my colleague

[Wullie10]

Thanks Robert. I plan to transfer the Cash Balance of NRA65 to a private pension along with what remains of my AVC. ( I took NRA60 ). A Few questions please. What will remain of the NR65 after the cashbuiler fund and the AVC is gone? Could I transfer the AVC as soon as it closes or wait 5 years to NRA65? and I think obviously best leave the cashbuiler where it is till 65 as they'll be a annual rise on it ? I'm not sure if I should take out another AVC in October . I assume I could transfer this to.

[RobertT]

Thanks Robert.
I plan to transfer the Cash Balance of NRA65 to a private pension along with what remains of my AVC. ( I took NRA60 ). A Few questions please.

What will remain of the NR65 after the cashbuiler fund and the AVC is gone?

The pension you accrued between 2010 and 2018, plus your standard lump sum if you're in section A/B.

Could I transfer the AVC as soon as it closes or wait 5 years to NRA65?

Whenever you choose.

I think obviously best leave the cashbuiler where it is till 65 as they'll be a annual rise on it ?

That's your choice too. It may also grow if you transfer, depending on where you invest it.

I'm not sure if I should take out another AVC in October . I assume I could transfer this to.

The normal tax benefits will apply, so each £1 gross that you pay only actually costs you 72p.
The RMCPP AVC Handbook says it is possible to transfer them out.

[Wullie10]

Thanks once again .

[Wullie10]

Final question. If I was to transfer the Cash Balance before NRA65 even tough it is closed I would lose 5% a year ? True ?

[RobertT]

Final question. If I was to transfer the Cash Balance before NRA65 even tough it is closed I would lose 5% a year ? True ?

There's been discussion on this forum over the years about whether the DBCBS is reduced when taken with the NRA65 pension before 65. The conclusion is at worse there is only a very small reduction(nowhere near 5% per year) and people's experiences suggest there is no reduction at all.

Transferring out is a different scenario and I don't think there would be a reduction in that instance either.

[July 1981]

I am currently awaiting my NRA 65 pension estimate and also a CETV, I had an appointment last week with a IFA with a view to transferring out my Cash Balance Fund which is in the region of 55K, I would like to do this as I wish to invest the full amount for a few years before I start the drawdown process, this also avoids having to pay some of above at 40% tax, the advisor I saw wouldn’t provide this service as he deemed it unethical as there minimum fee is 7.5K ( I wasn’t willing to pay this either) I am now trying to source someone through the unbiased site, does anyone have experience of transferring the above and what fees would appear reasonable?

[linntroika]

I have recently opened a SIPP with Hl and intend to transfer my cash balance once i reach 65 . According to their website the typical charge for advice is between 1-2% (which would appear very reasonable )
After i transfer the cash balance i intend to transfer my AVCs , but as far as i am aware you do not require advice for this process

The total pot would be well over £100k - but the advice would be based on the cash balance (around £50k)

hopefully this is correct - im sure Robert will clarify

Best

[RobertT]

If you're transferring a DB pension such as a final or average salary scheme to a DC pension, you will normally need the approval of an IFA if its value is above £30k.
Not all IFA's offer that service, not all are interested in low values and they're only supposed to approve it if it's in your best interests.
It's not just a case of them ticking a box to say yes because you want them to!

HL's website says they charge 1-2% for advice on where to invest your money. But charges for a secured pension transfer are subject to a separate structure – probably more!
https://www.hl.co.uk/financial-advice

The DBCBS is a grey area:
It's not a pension as such, as in it doesn't provide an income.
It grows in a defined way.
Legally it's classed as a sub class of money purchase/DC schemes.
If it's value is over £30k, you need IFA approval to transfer.

In theory a DBCBS transfer should be easier to attain than for a DB pension. But an IFA should still look at your age and compare what you're likely to get in returns from each option, amongst other things.

For example:
A transfer for a 65 year old might be approved because they're due to take it anyway with tax being an issue.
While a 55 year old might be turned down because it might be deemed the expected returns by keeping it where it is are better than transferring.

I have no experience, but personally I think around £3k is a realistic sum .

*No IFA needed for AVC transfers.

[July 1981]

I have recently opened a SIPP with Hl and intend to transfer my cash balance once i reach 65 . According to their website the typical charge for advice is between 1-2% (which would appear very reasonable )
After i transfer the cash balance i intend to transfer my AVCs , but as far as i am aware you do not require advice for this process

The total pot would be well over £100k - but the advice would be based on the cash balance (around £50k)

hopefully this is correct - im sure Robert will clarify

Best

Many thanks for your reply

[July 1981]

If you're transferring a DB pension such as a final or average salary scheme to a DC pension, you will normally need the approval of an IFA if its value is above £30k.
Not all IFA's offer that service, not all are interested in low values and they're only supposed to approve it if it's in your best interests.
It's not just a case of them ticking a box to say yes because you want them to!

HL's website says they charge 1-2% for advice on where to invest your money. But charges for a secured pension transfer are subject to a separate structure – probably more!
https://www.hl.co.uk/financial-advice

The DBCBS is a grey area:
It's not a pension as such, as in it doesn't provide an income.
It grows in a defined way.
Legally it's classed as a sub class of money purchase/DC schemes.
If it's value is over £30k, you need IFA approval to transfer.

In theory a DBCBS transfer should be easier to attain than for a DB pension. But an IFA should still look at your age and compare what you're likely to get in returns from each option, amongst other things.

For example:
A transfer for a 65 year old might be approved because they're due to take it anyway with tax being an issue.
While a 55 year old might be turned down because it might be deemed the expected returns by keeping it where it is are better than transferring.

I have no experience, but personally I think around £3k is a realistic sum .

*No IFA needed for AVC transfers.

Thanks Robert, ideally I only want to transfer out the cash balance scheme but it appears that the small amount of money doesn’t appeal to some of these IFA’s, once I find someone willing to help me transfer to a drawdown I will share on the process on the forum.