Final salary transfer help

Shimrod

Given that you are concerned about income, it sounds like you should not be considering a lump sum option should you choose to take the RBS pension as opposed to transferring out. Looking through the thread you haven't given any indication that you have an immediate need to such a large amount of capital.

Do you have the option of taking a late retirement from the RBS scheme? So rather than drawing the pension at 60 you take it at 61 or 62? If you do, it would be worth finding out how the income might revalue in those circumstances as that may give you a compromise of still retiring early.

Also, while looking through the booklet provided in an earlier link, I came across this statement for 'option 1' membership, which it sounds like you have:

If you were a member of The Royal Bank of Scotland Staff Pension Scheme before 1 January 2002, your pension will be reduced from State Pension Age by:
1/40 x State Pension deduction x pensionable service before 1 January 2002

Do you fall into this group, and if you do, are you aware of how much your pension may drop by when you reach state pension age?

fjh

When did you obtain the CETV's from RBS ? on basis if not recently then most have increased- may be worth asking for new illustrations

Benefriction

For shimrod
Thank you for the detail taken from the rbs pension booklet. My pension was started in the 70's with natwest so not sure if it applies to me. Rbs came in much later but I will contact them asap to find out.

xylophone

https://www.theguardian.com/money/2001/nov/10/personalpensions.pensions

The above is old - you'll have to check it out as you say.

kidmugsy

Benefriction wrote: »

The computations are:
£9997 income = cetv of £245012
£1500 income = cetv of £44120

Suppose that the two bits of pension can treated differently.

Long term, would you be able to live in reasonable comfort on the state pension plus the £10k of RBS pension income? If so, the question is how to bridge the gap to age 66.

If you took the other £44k of RBS pension as a transfer, then over 6 years it would work out as just over £7k p.a., partly tax-free. There would be no need to worry about investment strategies and all that; if you want to use it up in less than 10 years you could just keep it as cash within your pension pot.

So the two big questions are:

(i) Are you allowed to treat the two parts of the pension differently?

(ii) Can you live comfortably on about £17k p.a. with your mortgage paid off and having down-sized?

Other than that I echo Shimrod's point (#32) about the detail of your RBS pensions and jamesd's (#28) about the sums involved in downsizing. In particular on Shimrod's point you really need the scheme to give you an answer in writing, ideally including a copy of the relevant part of the T&Cs.

Benefriction

Looked at my state pension statement which is £155.65 pw due 2023 but there was a link to COPE - contracted out pension equivalent of £33.46 pw haven't a clue what it means so this is something else I will research today!!

Benefriction

The seamless transition of worker to a delightful world of relaxation and retirement is obviously a myth!! And in response to whatshis name who asks if I have been living under a rock - well yes but I have just crawled from under it and am considering crawling back under it!

jamesd

Benefriction wrote: »

And in response to whatshis name who asks if I have been living under a rock - well yes but I have just crawled from under it and am considering crawling back under it!

Well, a little hand holding and guidance is part of why people are here so just take your time learning the things you need to know to get yourself to your best possible position.

jamesd

Benefriction wrote: »

Looked at my state pension statement which is £155.65 pw due 2023 but there was a link to COPE - contracted out pension equivalent of £33.46 pw haven't a clue what it means so this is something else I will research today!!

COPE means contracted out pension equivalent. It's an imaginary number that estimates how much private pension the rebate or reduced NI from being in a contracted out pension would have got you on top of your state pension. For your two defined benefit pensions it's included in the pension income numbers which those gave you. So the DWP estimate is that about £1,739a a year of the combined DB pension income would come from being contracted out of the earnings-related part of the state pension.

The 155.65 is the current flat rate state pension cap level so that number is saying that you're expected to have reached the cap by 2023 if you carry on paying in. There should be another number saying how much you've accumulated so far. That might also be 155.65 but if it's lower, each year of paying in to the state pension system will get you an extra 1/35th of the flat rate cap amount increase until you reach the cap.

You're probably a winner from being contracted out. People who weren't contracted out just hit the flat rate cap sooner and don't also get the private pension that you'll get.

jamesd

Benefriction wrote: »

What type of new additional pension plan would be good for me if I am working I could use the rbs pension income and reinvest it in a new plan?

I suggest the Hargreaves Lansdown SIPP because they provide excellent customer service and their charges are OK for the amounts and time spans that you're considering.

Benefriction wrote: »

The computations are:
£9997 income = cetv of £245012
£1500 income = cetv of £44120
Tot cetv tf of £289132

The lump sum of £47829 means reduced income of £7181 and
lump sum £7307 means a reduced income of £1087

OK, so it appears that pending learning more about the possible effect of downsizing, a plan could be to transfer out the £1500 income one and draw on that to bump up your income on top of taking the income as normal from the other one.

This would result in: £9997 income and £44120 lump sum, 25% tax free, rest taxable. Ignoring tax an effective commutation rate of 44120 / (11497-9997) = 29.41.

If you took the tax free lump sum and income from both that would be £8286 income and £55136 tax free lump sum. Effectively a commutation rate of 55136/(11497-8286) = 17.17.

There's a 1711 higher income and 11016 lower lump sum from doing it the transfer way rather than taking tax free lump sum from both. As I expected, that's more efficient in terms of lump sum amount per Pound of income given up. Higher commutation rates are good and this approach before costs boosts it from 17.17 to 29.41.

Ignoring interest/growth and income tax it looks as though this approach would get you an income of £9997 + (£44120 / 6) = £17350 a year until state pension age then £9997 + £155*52 = £18057. Vs £9997 + £1500 = £11497 until state pension age then £19557.

Benefriction wrote: »

Ideally for me to live ok I would need a further £300 - £500 per month additional income

300x12 +11497 = 15397 and 500x12 + 11497 = 17497. How does that £17350 look for your planning? Looks likely to be close enough given that you'd also get some interest/growth. But remember this does mean a decrease from £19557 to £18057 from state pension age for the rest of your life.

Benefriction wrote: »

Another alternative could be to continue working and take the full pension (income only) and save this to pay off mtge in 4 mnths could be mtge free. This could help my situation.

The working a few months more part is a good way to cut your expenses for the rest of The six years so I like that part if you can deal with that. But downsizing probably takes care of the mortgage anyway.

I ignored income tax earlier because you'll have quite a lot of personal allowance available so will still be able to get a lot of the taxable portion of the after transfer lump sum out tax free.