Taking NRA 65 Benefits early calculation worry.

[Stef]

Hi I am 58 years old and plan to retire at age 60. I plan to take both my NRA 60 and NRA 65 benefits at 60 when I leave Royal Mail. I am in Section C.
My concern is that I checked out my NRA 65 figures on the online Royal Mail Pension Plan Retirement Calculator website to see what penalty reductions I would loose for taking my NRA 65 early at 60 years old ( 5 years early)
https://www.royalmailpensionplan.co.uk/ ... lculators/
I had thought that to take your NRA 65 benefits early it would be reduced 5% for each year you take it early. Therefore I was expecting a 25% deduction for taking it early at age 60. I was surprised the penalty percentages each year are higher than the 5% each year I originally thought.
On the retirement calculator website it asks if you have your recent NRA 65 illustration ( Squirrel one) . I ticked yes and copied my figures into the calculator. So on my Squirrel illustration it says I have zero NRA 60 and zero NRA 60 supplement figures. I have £2432 NRA 65 benefits and £451 supplement figures. I have a cash Balance of £ 32057. The figures the calculator gave me are as follows.
So if I took my NRA 65 at age 64 (one year early) it would be £2242.30 a 7.8% reduction penalty.
If I took it at age 63 ( 2 years early) it would be £2069.63 a 14.9% reduction penalty.
If I took it at age 62 ( 3 years early) it would be £1913.98 a 21.3% reduction penalty.
If I took it at age 61 ( 4 years early) it would be £1772.93 a 27.1% reduction penalty.
If I took it at age 60 ( 5 years early ) it would be £1644.03 a 32.4% reduction penalty
These reduction percentages shocked me. Does anyone know why the reduction percentages are so high. Why are they above the 5% for each year that everyone usually works things out with?
For anyone who is curious the NRA 65 pension supplement was reduced from £451 to £102.73 a massive reduction of 76.9% for taking at age 60 ( 5 years early)
Also the cash Balance fund went from £32057 to £29813.01 a reduction of 7% only if taken at age 60 ( 5 years early). This I can handle but the reduction percentage for the NRA 65 pension and supplement seem ridiculous. It would be much appreciated if anyone can explain why the reduction percentages are way higher than the 5% deduction most people use to work out pensions when taken early. Thanks folks for reading.

[RobertT]

It does say the following on the 1st page of the calculator section:

From 1st March 2026, the factors used for calculating your RMPP benefits will change. The modeller has incorporated these new factors to reflect what your benefit payments could be.

Going from previous experimenting I've done with the calculator, your figures for the Cash Balance and supplement are more or less what I'd expect.

The Cash Balance sees about a 1.4% reduction per year when taken early. Which I think changed from 0% a year or two ago, perhaps around the time the scheme closed in October 2024?

With the supplement, I believe they take the total amount you'd get if taken at 65 and until SPA – in your case £902(assuming 67 SPA). Then take off an amount for early payment, then divide by the number of years you'll be receiving it.

The big change seems to be that the pension is now reduced by more than 5% per year when taken early.
And the yearly reduction seems to be lower with each year you take it before NRA.

[jessicarabbit]

I know everyone's different but presumably it moves the break even point of going early further forward(younger) so maybe discourage 'healthier' posties going early?

It's all such a minefield and when you've done 30+ years like me and you are in so many different schemes it's even worse. Really hoping the pensions portal we've been promised can put it all together for us in an easy to access way in the next few years

[RobertT]

I know everyone's different but presumably it moves the break even point of going early further forward(younger) so maybe discourage 'healthier' posties going early?

I'm not sure whether this just applies to RMPP benefits, but it does make taking your Age65 pension early less attractive. Both in terms of how much you'll get annually and over your retirement as a whole.

It's all such a minefield and when you've done 30+ years like me and you are in so many different schemes it's even worse. Really hoping the pensions portal we've been promised can put it all together for us in an easy to access way in the next few years

Pensions Dashboards?
I get the impression they will be a one stop shop for all the pensions you have, including from the state. They probably won't provide any additional info on top what you can already get from annual statements and online portals.

[jessicarabbit]

That's disappointing I was kind of hoping it would be a one stop shop and actually put everything together for you. Another 30 year man in our place wrote off for his nra60 quote and got back about 20 pages of figures with different amounts for different percentage options etc. I just want to know I'm getting all I'm entitled too when I go really. I'll decide how I spread it out between lump sum and annuity nearer the time I guess.

[Hyrrokkin]

It does say the following on the 1st page of the calculator section:

From 1st March 2026, the factors used for calculating your RMPP benefits will change. The modeller has incorporated these new factors to reflect what your benefit payments could be.

Going from previous experimenting I've done with the calculator, your figures for the Cash Balance and supplement are more or less what I'd expect.

The Cash Balance sees about a 1.4% reduction per year when taken early. Which I think changed from 0% a year or two ago, perhaps around the time the scheme closed in October 2024?

With the supplement, I believe they take the total amount you'd get if taken at 65 and until SPA – in your case £902(assuming 67 SPA). Then take off an amount for early payment, then divide by the number of years you'll be receiving it.

The big change seems to be that the pension is now reduced by more than 5% per year when taken early.
And the yearly reduction seems to be lower with each year you take it before NRA.

Do you know why that is the case ? - what is the reason for the change and why now.

Pretty unfair for those who want to take their RMPP early now as opposed to those previously.

Rules change all the time but i did not see any mention of this in the last pension booklet (unless i missed it).

[RobertT]

Do you know why that is the case ? - what is the reason for the change and why now.

Pretty unfair for those who want to take their RMPP early now as opposed to those previously.

Rules change all the time but i did not see any mention of this in the last pension booklet (unless i missed it).

To be honest, I haven't got a clue!
As you say, things can and do change and there was never anything set in stone about it being 5% per year.

It seems strange considering the hefty surplus.

To put it into some context using Stef's figures, a 32.4% reduction for taking his RMPP Age65 5 years early instead of 25%, would mean £180 per year less. So not a deal breaker, but still not ideal.

[heapsy]

A mate of mine, (section B) went 3 yrs ago this month. He's on holiday, so I haven't got his figures. But I know his NRA65 pension was reduced, even then.

[Stef]

Thanks RobertT and all others for your input. Yes as RobertT says the difference between 25% and 32.4% reductions is only £180 per year, not a lot of money over the year to be honest. I think it is better for everyone to know upfront that the reduction figure is higher now for the NRA65 when taken early. As much as I'm disappointed it won't stop me retiring at 60. I've been with Royal Mail since 1989. My memories away back then as a 21 year old were watching all the Old ones retire at 60 with a spring in their step thinking that will be me one day. I've always been determined to keep that thought alive and retire at 60. AVC's have been my ticket to escape early. Now I'm the old yin and it will soon be my time to go at 60 with a spring in my step which I'm delighted with.

[Gary55]

All the best mate

[Hyrrokkin]

Thanks RobertT and all others for your input. Yes as RobertT says the difference between 25% and 32.4% reductions is only £180 per year, not a lot of money over the year to be honest. I think it is better for everyone to know upfront that the reduction figure is higher now for the NRA65 when taken early. As much as I'm disappointed it won't stop me retiring at 60. I've been with Royal Mail since 1989. My memories away back then as a 21 year old were watching all the Old ones retire at 60 with a spring in their step thinking that will be me one day. I've always been determined to keep that thought alive and retire at 60. AVC's have been my ticket to escape early. Now I'm the old yin and it will soon be my time to go at 60 with a spring in my step which I'm delighted with.

It is pretty poor that RMPP have not even bothered to mention this anywhere (feel free anyone to correct me if i am wrong)

RM pensions are over complicated as it is but basic information like this should and has to be up front for anyone to make a fair decision.

[RobertT]

It is pretty poor that RMPP have not even bothered to mention this anywhere (feel free anyone to correct me if i am wrong)

RM pensions are over complicated as it is but basic information like this should and has to be up front for anyone to make a fair decision.

Their only communication seems to be the brief message about the factors for working out benefits having changed, on the calculator section of the website.

Maybe they thought nobody would take the trouble to work out the percentages for themselves?

[royals]

Do you know why that is the case ? - what is the reason for the change and why now.

Pretty unfair for those who want to take their RMPP early now as opposed to those previously.

Rules change all the time but i did not see any mention of this in the last pension booklet (unless i missed it).

To be honest, I haven't got a clue!
As you say, things can and do change and there was never anything set in stone about it being 5% per year.

It seems strange considering the hefty surplus.

To put it into some context using Stef's figures, a 32.4% reduction for taking his RMPP Age65 5 years early instead of 25%, would mean £180 per year less. So not a deal breaker, but still not ideal.

My theory is so many of us are late fifties and pondering on taking our pensions and leaving early that they have put the higher charges in as a deterrent to stop people leaving and draining the pot for a longer time

[heapsy]

Do you know why that is the case ? - what is the reason for the change and why now.

Pretty unfair for those who want to take their RMPP early now as opposed to those previously.

Rules change all the time but i did not see any mention of this in the last pension booklet (unless i missed it).

To be honest, I haven't got a clue!
As you say, things can and do change and there was never anything set in stone about it being 5% per year.

It seems strange considering the hefty surplus.

To put it into some context using Stef's figures, a 32.4% reduction for taking his RMPP Age65 5 years early instead of 25%, would mean £180 per year less. So not a deal breaker, but still not ideal.

My theory is so many of us are late fifties and pondering on taking our pensions and leaving early that they have put the higher charges in as a deterrent to stop people leaving and draining the pot for a longer time

Just been reading this update, and I'm thinking the same thing. If you think about probable life span, increases in pension payments, and the increase in duration of payments, if taken early, it makes for the perfect storm.

[Stef]

It made me wonder how to work out my total pension pot worth for my NRA 65. I will be taking it reduced at age 60. Would it be the figure if I took it unreduced or would it be the figure if I took it reduced? It feels like a stupid question to ask as it seems obvious it would be the reduced figures I use to calculate but I am just wanting to be 100% sure. Sorry guys and girls I'm still trying to learn all this stuff and trying to increase my knowledge.
NRA65 unreduced £2432 X 20 = £48640 with a cash Balance unreduced of £32057
NRA65 reduced at 60 years old £1644 X 20 = £32880 + a reduced cash Balance reduced at 60 years old of £29813.
If I go with the obvious reduced figures my NRA65 pot would be £32880, therefore I would be allowed a 25% tax free lump sum of £10960 and this would come of the cash Balance. So this would leave £18853 of the cash Balance which would be taxable. So say 20% of this is tax then £3770.60 would be the figure I subtract from the £18853 which leaves £15082.40 which is added to the 25% tax free lump sum which is a total lump sum of £26042.40 ?
I was wondering if my calculations are close to being correct or have I got a lot to learn
I think I'll need to go for a lie down now after workout that out