Cash balance

[Gary55]

Hi I'm planning to retire in may 26. Obviously not basing my decision on this but would it hugely reduce the tax id pay on the cash balance 75% tax liable portion. I assuming this as retiring so early in the new tax year. Any thoughts thanks

[RobertT]

Generally speaking, you'll pay less tax by taking your DBCBS in a year when you have lower earnings. But it'll obviously come down to the amounts of money involved.

Just use the tax bands as a guide and compare your estimated income under different scenarios to see the best time to take your benefits from a tax point of view.:

Income up to £12,570 in any financial year is tax free
£12,571 - £50,270 is taxed at 20%
£50,271+ is taxed at 40%


*Going by posts on here, UFPLS payments from the DBCBS are paid around 12-16 weeks after the main pension/lump sum. So could straddle two tax years for some people.

[roadrunner bill]

I've just got my cash balance statement.. 32k..

If I take it at 55...

I was told I'd get about 30 k... and pay 2k in tax..

Is this true please ?

[RobertT]

I've just got my cash balance statement.. 32k..
If I take it at 55...
I was told I'd get about 30 k... and pay 2k in tax..
Is this true please ?

In practice it will depend which section you're in and how you decide to take your Age65 benefits.

You have two choices:

1. The most tax efficient way for most people will be to use as much DBCBS to fund the 25% tax free cash as you can, without giving up any pension. With the remainder being paid out as a UFPLS, 25% of which will also be tax free.

Section A/B members might save themselves more tax by giving up some or all of their standard lump sum for more pension.

But it's impossible for anyone to give you even ballpark figures without knowing which section or how much RMPP Age65 pension you're due.

2. Fund your 25% tax free cash entirely by giving up some pension(inc standard lump sum for section A/B) and then take the whole DBCBS pot as a UFPLS. In that case, out of your £32k about £14k will be tax free and £18k will count as income and be taxed accordingly. If your total income for that particular financial year stays completely in the 20% tax band, you'll lose about £3,600 in tax.
Meaning a total of £28,400 in your pocket.

[roadrunner bill]

Thank you.. I really am a noob.. with pension.. I'm in section c..

[RobertT]

Sorry I got myself a bit mixed up with the figures in my previous post.

It should read:

Out of the £32k, £8k will be tax free and the remaining £24k counting as income and taxed accordingly.

If your total income for that particular financial year is within the 20% band(<£50,270), you'll lose £4,800 in tax, leaving £27,200 in your pocket.

If your income exceeds £50,270, you'll pay 40% tax on anything over.

[NWpostie]

Would it be tax efficient to take your NRA60 in one tax year then defer claiming NRA65 to the following tax year ?

[billycat]

Im a bit confused last year cash balance was £31677 as of 31 march 2024 I’ve just received 31 march 2025 and the balance is £35571 can anybody help explain or are my figures wrong thanks in advance.

[RobertT]

Would it be tax efficient to take your NRA60 in one tax year then defer claiming NRA65 to the following tax year ?

If you can stay within the 20% tax band instead of hitting 40%, or even keep yourself in the 0% band instead of 20%, then yes it would.

But that will obviously depend on what your overall income is.

You'd also have to weigh up the difference between taking your Age65 4 years early instead of 5.

[RobertT]

Im a bit confused last year cash balance was £31677 as of 31 march 2024 I’ve just received 31 march 2025 and the balance is £35571 can anybody help explain or are my figures wrong thanks in advance.

I can't really comment on the exact figures because they're likely to vary with the individual to some degree. But the DBCBS closed in October 2024, so this years figures include 6 months of contributions from April to October 2024, plus the latest annual increase applied on 1st April this year.

[billycat]

Cheers Robert that makes sense.

[billycat]

Could somebody give me a rough estimate on what I can expect from my nra65 pension annual figures £2675plus £675 I have an avc with £13000 also my cash balance is around £35550i want to keep as much annual pension as possible roughly how much tax free money would I generate of these figures also roughly how much would I have left to be taxed thanks in advance if anybody can work this out for me.

[RobertT]

Could somebody give me a rough estimate on what I can expect from my nra65 pension annual figures £2675plus £675 I have an avc with £13000 also my cash balance is around £35550i want to keep as much annual pension as possible roughly how much tax free money would I generate of these figures also roughly how much would I have left to be taxed thanks in advance if anybody can work this out for me.

The DBCBS can only be taken with RMPP Age65 pension, so is all of that £2,675 from the RMPP or is some of it from the RMSPS?
What is the £675?

[billycat]

Sorry Robert £675.00 is the fund run by capita

[RobertT]

Sorry Robert £675.00 is the fund run by capita

The usual way of working out the value of your pension is to multiple it by 20. That is then effectively 75% of your total pot value and your DBCBS or AVC's can then be used to fund the other 25% as tax free cash. With any remainder being paid out as a UFPLS, which means 25% of that is also tax free.
Once you've multiplied by 20, a very easy way of working out the maximum tax free amount is to then divide by 3.

You'll need to work out the two parts separately....

In your case, for your RMPP Age65 numbers:

2,675 x 20 = 53,500 / 3 = 17,833

And for RMSPS:

675 x 20 = 13,500 /3 = 4,500

The DBCBS can only be taken with RMPP Age65, so roughly half will be the 255 tax free and the rest paid as a UFPLS. Meaning a total of £22,250 is actually tax free and the remaining £13,250 classed as income and taxed accordingly.

£4,500 of the AVC will tax free with RMSPS Age65, so the rest will be paid as a UFPLS. Meaning a total of £6,625 will be tax free and the remaining £6,375 classed as income and taxed accordingly.

There is also the option to transfer out your AVC to a personal pension and access your money differently. But as you should get just over 50% of it tax free by taking it with your Age65 benefits, you would need to beat that to make it worthwhile.

I hope that makes sense and helps you and others understand how things are worked out.


*All calculations are ballpark and based on taking benefits at NRA without any early payment reductions.