Considering moving from NEST to CPP, some technical questions

[posted]

I was in the DC scheme and being happy with that, I decided not to join the CDC scheme when it launched and went in with the NEST scheme.

It’s been ok but I’m now reassessing my goals and retirement plans. That may involve switching to CPP and transferring my NEST pot to L&G.

I’ve read through the CPP website and handbook but had some additional questions.

• Am I right in thinking the increases are applied with a while year’s lag? I.e. for benefits built upto 31st March 2025, the increase is applied after 31st March 2026

• Having looked at investment performance returns of for both sections of the plan, which were mostly negative, they’ve somehow managed to apply quite generous increases to the benefits. How is that?

• Have valuations and the increments to Income and LS for benefits upto 31st March 2026 been published yet?

• Will the AVCs also be moving from SW to L&G, like the RMDCP?

• Unused DC pots will come under the scope of IHT in a few years. Does that also apply to the DBLS? Does it apply to AVCs?

• How are the benefits reduced if accessed before age 67 (in normal circumstances)? Is there a formula?

• Do deferred members also get the annual increases/decreases or is it frozen?

• If I die before getting my benefits, I know the percentage paid to dependants as income varies if they’re a child or adult , do they get that for the rest of their life?

• Getting the Lump Sum completely tax free, it would have to be worth upto 25% of the combined value of Income (as lump value) + LS. In the handbook on page 77, Keith gets the full £44k LS as tax free but it’s not clear how that has been worked out to be upto 25% of the total benefit. They must multiply the annual income by something. My math isn’t mathing!

I’ve tried my best to understand it all from the handbook but couldn’t find answers to the above.

[RobertT]

• Am I right in thinking the increases are applied with a while year’s lag? I.e. for benefits built upto 31st March 2025, the increase is applied after 31st March 2026

Yes.

• Having looked at investment performance returns of for both sections of the plan, which were mostly negative, they’ve somehow managed to apply quite generous increases to the benefits. How is that?

It's done in a similar way to a with profits fund, so increases are based on expected returns over a longer period of time, not just the previous 12 months.

• Have valuations and the increments to Income and LS for benefits upto 31st March 2026 been published yet?

No.
I think the figures for 2024/25 were released in February 2026. I would expect a similar time each year.

• Will the AVCs also be moving from SW to L&G, like the RMDCP?

No.
AVC's attached to both the RMCPP and RMPP are staying with SW.

• Unused DC pots will come under the scope of IHT in a few years. Does that also apply to the DBLS? Does it apply to AVCs?

As far as I'm aware the RMCPP will come come under IHT from 2027 if it hasn't already been accessed before death.

• How are the benefits reduced if accessed before age 67 (in normal circumstances)? Is there a formula?

Because of how the scheme works, I doubt there is an easy user friendly formula.

• Do deferred members also get the annual increases/decreases or is it frozen?

Increases/decreases are applied to all members equally.

• If I die before getting my benefits, I know the percentage paid to dependants as income varies if they’re a child or adult , do they get that for the rest of their life?

A child would get a dependents pension for as long as they're eligible.(Under 18, under 23 and in full-time education, or any age and assessed to be dependent because of physical or mental impairment.)

• Getting the Lump Sum completely tax free, it would have to be worth upto 25% of the combined value of Income (as lump value) + LS. In the handbook on page 77, Keith gets the full £44k LS as tax free but it’s not clear how that has been worked out to be upto 25% of the total benefit. They must multiply the annual income by something. My math isn’t mathing!

For DB schemes that multiple is 20, but as RMCPP benefits are variable I don't think it's as simple as multiplying by a specific number.
The early payment reduction is going to vary depending on how the scheme is performing along with mortality rates, etc. So I would guess the way the pension is valued in relation to the tax free lump sum would be similar.

[yellowbelly]

• Am I right in thinking the increases are applied with a while year’s lag? I.e. for benefits built upto 31st March 2025, the increase is applied after 31st March 2026

Yes.

• Having looked at investment performance returns of for both sections of the plan, which were mostly negative, they’ve somehow managed to apply quite generous increases to the benefits. How is that?

It's done in a similar way to a with profits fund, so increases are based on expected returns over a longer period of time, not just the previous 12 months.

• Have valuations and the increments to Income and LS for benefits upto 31st March 2026 been published yet?

No.
I think the figures for 2024/25 were released in February 2026. I would expect a similar time each year.

• Will the AVCs also be moving from SW to L&G, like the RMDCP?

No.
AVC's attached to both the RMCPP and RMPP are staying with SW.

• Unused DC pots will come under the scope of IHT in a few years. Does that also apply to the DBLS? Does it apply to AVCs?

As far as I'm aware the RMCPP will come come under IHT from 2027 if it hasn't already been accessed before death.

• How are the benefits reduced if accessed before age 67 (in normal circumstances)? Is there a formula?

Because of how the scheme works, I doubt there is an easy user friendly formula.

• Do deferred members also get the annual increases/decreases or is it frozen?

Increases/decreases are applied to all members equally.

• If I die before getting my benefits, I know the percentage paid to dependants as income varies if they’re a child or adult , do they get that for the rest of their life?

A child would get a dependents pension for as long as they're eligible.(Under 18, under 23 and in full-time education, or any age and assessed to be dependent because of physical or mental impairment.)

• Getting the Lump Sum completely tax free, it would have to be worth upto 25% of the combined value of Income (as lump value) + LS. In the handbook on page 77, Keith gets the full £44k LS as tax free but it’s not clear how that has been worked out to be upto 25% of the total benefit. They must multiply the annual income by something. My math isn’t mathing!

For DB schemes that multiple is 20, but as RMCPP benefits are variable I don't think it's as simple as multiplying by a specific number.
The early payment reduction is going to vary depending on how the scheme is performing along with mortality rates, etc. So I would guess the way the pension is valued in relation to the tax free lump sum would be similar.

Once again RT, on behalf of those who are not pension savvy, many thanks for your responses. And at six in the morning too!

[posted]

• Am I right in thinking the increases are applied with a while year’s lag? I.e. for benefits built upto 31st March 2025, the increase is applied after 31st March 2026

Yes.

• Having looked at investment performance returns of for both sections of the plan, which were mostly negative, they’ve somehow managed to apply quite generous increases to the benefits. How is that?

It's done in a similar way to a with profits fund, so increases are based on expected returns over a longer period of time, not just the previous 12 months.

• Have valuations and the increments to Income and LS for benefits upto 31st March 2026 been published yet?

No.
I think the figures for 2024/25 were released in February 2026. I would expect a similar time each year.

• Will the AVCs also be moving from SW to L&G, like the RMDCP?

No.
AVC's attached to both the RMCPP and RMPP are staying with SW.

• Unused DC pots will come under the scope of IHT in a few years. Does that also apply to the DBLS? Does it apply to AVCs?

As far as I'm aware the RMCPP will come come under IHT from 2027 if it hasn't already been accessed before death.

• How are the benefits reduced if accessed before age 67 (in normal circumstances)? Is there a formula?

Because of how the scheme works, I doubt there is an easy user friendly formula.

• Do deferred members also get the annual increases/decreases or is it frozen?

Increases/decreases are applied to all members equally.

• If I die before getting my benefits, I know the percentage paid to dependants as income varies if they’re a child or adult , do they get that for the rest of their life?

A child would get a dependents pension for as long as they're eligible.(Under 18, under 23 and in full-time education, or any age and assessed to be dependent because of physical or mental impairment.)

• Getting the Lump Sum completely tax free, it would have to be worth upto 25% of the combined value of Income (as lump value) + LS. In the handbook on page 77, Keith gets the full £44k LS as tax free but it’s not clear how that has been worked out to be upto 25% of the total benefit. They must multiply the annual income by something. My math isn’t mathing!

For DB schemes that multiple is 20, but as RMCPP benefits are variable I don't think it's as simple as multiplying by a specific number.
The early payment reduction is going to vary depending on how the scheme is performing along with mortality rates, etc. So I would guess the way the pension is valued in relation to the tax free lump sum would be similar.

Thank you for the quick response.
I’m a little surprised the Income element would come under IHT. Again, there would need to be a value associated with it. So potentially inheritors receive it net of any IHT and then as double whammy would by any income tax on it too.

On a wider point re 25% tax free… if I was to take the 25% of my RMDC pot at age 57, once I reach 67, can I still take my DBLS upto 25% tax free?
I.e. they are treated as 2 distinct pension pots with their own 25% tax-free ‘allowance’

[RobertT]

Once again RT, on behalf of those who are not pension savvy, many thanks for your responses. And at six in the morning too!

I don't think this sites clock is correct, it was nearly 7.00 when I posted.

I still get up early – it's one of the few things that remain from my time at RM(apart from posting about pensions on here ). Plus as a keen runner, it's the best time to go in this warm weather.

[RobertT]

Thank you for the quick response.
I’m a little surprised the Income element would come under IHT. Again, there would need to be a value associated with it. So potentially inheritors receive it net of any IHT and then as double whammy would by any income tax on it too.

I'm no tax expert, but my understanding is that because CDC schemes are DC/money purchase, then their value would come under IHT from 2027. I'm assuming that would be worked out in a similar way to a transfer value.

My reading of the handbook(page 56), is that part of the pension will be paid out as income to a dependant and part as a lump sum. With the DBLS value also paid out.

On a wider point re 25% tax free… if I was to take the 25% of my RMDC pot at age 57, once I reach 67, can I still take my DBLS upto 25% tax free?
I.e. they are treated as 2 distinct pension pots with their own 25% tax-free ‘allowance’

You can take 25% tax free cash from every pension you have(except the state). The only rule is you can't take more than £268,275 in total.
As long as the DBLS is 25% or less than the total value of your RMCPP benefits, you can take it all tax free.

In my opinion, the only way it'll exceed 25% is if the pension element tanks, so there shouldn't really be a problem.
Therefore paying extra into the Booster and so increasing your DBLS, is a no-brainer. Any tax you do pay, is likely to be outweighed by the additional contributions from RM.

[posted]

Thanks. I’m going to have serious think about joining.

Sadly there’s not many numbers to run this by as there’s only 1 year of increases so difficult to make an informed decision. I’ve read how they decide to make increases but it is quite technical.

I was happy with the RMDCP and expected NEST would’ve been similar returns, hence I flipped to that instead of joining CDC.

But that 1.8% contribution fee and 30% sukuk they brought into the Sharia fund last year has me reassessing it.

If I do join CPP, I’ll obviously go for the LS booster and also AVCs.

Once the Salary Sacrifice rules change re the £2k annual relief, I’ll probably stop the AVCs and just contribute that amount directly to a SIPP or even the L&G Masterplan where the DC plan will be held.

Much to think about!

[RobertT]

[Hitcher]

Once the Salary Sacrifice rules change re the £2k annual relief, I’ll probably stop the AVCs and just contribute that amount directly to a SIPP or even the L&G Masterplan where the DC plan will be held.

Someone correct me if I'm wrong but the AVC still wins if you pay in more than £2000 because that only affects your NI saving. You still benefit from the 20% income tax saving whereas with the SIPP you'll be paying both before paying into the SIPP.

[RobertT]

Once the Salary Sacrifice rules change re the £2k annual relief, I’ll probably stop the AVCs and just contribute that amount directly to a SIPP or even the L&G Masterplan where the DC plan will be held.

Someone correct me if I'm wrong but the AVC still wins if you pay in more than £2000 because that only affects your NI saving. You still benefit from the 20% income tax saving whereas with the SIPP you'll be paying both before paying into the SIPP.

Tax isn't my strong point and I'm more than happy to be corrected, but my understanding is they're the same!

All pension payments benefit from tax relief as long as you're not putting in more than you earn per year. Up to a limit of £60k.

With salary sacrifice each £100 gross only actually costs £72 net, because of the 20% tax relief and 8% NI relief.
So if SS is removed over £2k, each £100 gross will then cost £80 net.

But if you pay into a SIPP instead, you'll pay tax and NIC's on that £100 leaving you an extra £72 in your take home pay.
If you want to then put £100 gross into a SIPP, you'll need to find another £8 on top of that £72.

Either way, you're £8 worse off per £100.

[Hitcher]

Of course you're right, I forgot that when paying into a SIPP they claim the income tax back. So over £2000 they're the same.