ROYAL MAIL PENSION QUOTE AT 55 DONT UNDERSTAND

oliel

Hi i had my pension quote from royal mail im in section C - my understanding is that theses are the figures if i decide to take my pension at 55

My RMPP pension shows the following
Option 1
regular income £1503 pa
tax free cash none
tax free cash from cash balance none
leftover benefits from cash balance none
Option 1A
regular income £1503 pa
tax fee cash none
tax free cash from cash balance £10229
leftover benefits from your cash balance £16581
Option 2
regular income £1211 
tax free cash £8077
Tax free cash from your cash balance none
leftover benefits from your cash balance none

This reads to me that Option 1A is best option trying to work out why anyone would choose option 1 or 2 - feel im missing something here?

any help much appreciated - super confused.

Vitor

I expect 1A is the option most people would go for. Option 1 would attract people who want the cash balance to grow, option 2 if you want max cash now and perhaps have a life shortening illness. 

Keep_pedalling

I think the cash balance refers to the AVCs you built up along side your DB pension. If you take options 1 or 2 these won’t be touched so can be transferred to an alternative pension provider. 

where_are_we

My advice is only take your benefits at 55 if you have very poor health and your life expectancy is limited. Do you really need the cash now?
Taking money now is very short sighted. You will be much better off in the long run by taking your Age 60 benefits at 60 and your Age 65 benefits at 65. Do you have a spouse? If you predecease them, they will be better off afterwards by you not taking your benefits early. I didn`t take my Age 60 and Age 65 benefits early at 55 and now, in my mid seventies, I am glad of my decision not reduce my regular modest RMPP income by taking benefits early.
Consult your CWU financial Rep before you decide to proceed.

xylophone

Presumably the benefits are reduced for early payment?

Are you continuing to work for the company after taking benefits (some sort of flexible retirement)?

Do options 1 and 2 permit you to leave your cash balance within the scheme to take at a later date?

Option 1A  allows you a small monthly pension, a tax free PCLS and an amount to take as taxable income?

Did you see below?

https://forums.moneysavingexpert.com/discussion/comment/81542870/#Comment_81542870

xylophone

Have you checked your State Pension forecast?

https://www.gov.uk/check-state-pension

marlot

You clearly have some AVCs.  Could they be £26,810?

If you treat your DB pension and AVC as separate items, you can withdraw 25% of the £26810 tax free when you come to take it.  so £6702.

Option 1A is a VERY tax efficient way of releasing the money from the AVCs - essentially the RM DB pension and your AVC are added together into one pot for calculating the 25% tax free - so giving you a much bigger tax free cash element.

xylophone

You clearly have some AVCs.

Cash Balance is not AVC.

https://www.royalmailpensionplan.co.uk/section-c/

Cash Balance

This is the cash sum you built up from 1 April 2018 to 6 October 2024 (when the RMPP closes). 

 

You can take some or all of this amount as part of your tax-free cash, or income when you retire from an external provider.

DRS1

So why do Options 1 and 2 leave the cash balance out of the equation?  What do those options assume will happen to the cash balance?

dasherman

xylophone said:

You clearly have some AVCs.

Cash Balance is not AVC.

It's not an AVC, but for section A, B & C members of the RM Pension Plan it works in a very similar way to an AVC. It's there to fund the tax free cash when taking RMPP benefits.

dasherman

DRS1 said:

So why do Options 1 and 2 leave the cash balance out of the equation?  What do those options assume will happen to the cash balance?

If you don't want to use it to fund the PCLS, you can either take it as a UFPLS or transfer it out.