A big part of taking this next step is making sure your loved ones are looked after when you die.
When you’re ready to get your income for life and lump sum, you’ll need to let the Pensions Service Centre know.
Income from a pension is taxable.
The tax you pay depends on your own personal circumstances, but it’ll be slightly different for your income for life and your lump sum.
This page explains who can choose to transfer out of the Collective Plan.
But, deciding to transfer out is a big decision and one you shouldn’t take lightly.
If you die after you start to get your income for life
Your income for life (to an eligible dependant, other than a child)
Half (50%) of what you’ve built up as an income for life at the date of your death will go to your eligible dependant, if you have one.
Plus, if you have children
If you have one eligible child, they’ll get a quarter (25%) of what you’re getting as an income for life. If you have more than one child who’s eligible, half (50%) of what you’re getting will be shared between them. These incomes are payable for so long as the children remain eligible.
But, just like the income for life you get each month in retirement, the amount your dependants will get each month as an income will be adjusted every year – so what they will get will go up, or down or stay the same each year. We will let them know every year what they’ll get for the next 12 months.
Your lump sum
When you start getting your income for life, your one-off lump sum is paid at the same time (you can’t get these at different times), so there will be no lump sum paid to your dependants when you die.
Take a look at the Collective Plan’s Handbook for more information about how we define child and dependant.
If you die before you’ve started getting your income for life
If you die before you’ve started to get your income for life, your dependants may get some of your income too. Find out more about what happens to your income for life when you die, before you start to get it.
Let us know who you’d like your money to go to when you die by logging into your Collective Plan account. You can update the details at any time. We will take your wishes into account in the event of your death.
Page last updated 1 May 2024
The steps you will need to take will depend on when you get your income for life and lump sum.
If you want to get your income for life and lump sum...
About 4 to 5 months before you turn age 67, as long as they have an address for you, the Pensions Service Centre (PSC) will automatically send you a retirement estimate that will tell you how much income for life and lump sum you are likely to get if you get them at age 67.
The letter will explain what you need to do. There will be some forms and information you need to provide to the Pensions Service Centre. Make sure to do this as soon as possible to help prevent any delays.
If you haven’t heard from the Pensions Service Centre within this timeframe – please do get in touch with them, as they may have out of date contact details for you.
If you have stopped working for Royal Mail and/or stopped paying into the Collective Plan before age 67 - you must get your income for life and lump sum by age 67. If you don’t get your income for life and lump sum before you turn age 67, these will automatically be put into payment with effect from your 67th birthday. Make sure to contact the Pensions Service Centre before your 67th birthday, so they know where to make the payments. If we’re unable to put your income for life into payment at age 67, you will not get anything extra. You could receive backdated payments for missed payments up to a period of six years.
Find out more about when you can get your income for life and lump sum, if you’ve stopped working for Royal Mail and/or stopped paying into the Collective Plan.
You can request to get your income for life and lump sum before age 67. But it’s worth noting that, depending on your circumstances, either Royal Mail or the Trustees have the right to refuse payment of your income for life and lump sum before age 67. You can only get your income for life and lump sum after age 67 if you’re still working for Royal Mail.
Here are the steps for you to take:
Let the Pensions Service Centre know that you’re nearly ready to start getting your income for life and get your one-off lump sum.
You’ll need to tell the Pensions Service Centre the date you would like to get your income for life and lump sum, this is known as your ‘retirement date’. If you’re over 67 and still working for Royal Mail, this will be the day after your last day of employment. If you’ve stopped working for Royal Mail and are requesting to get your income for life and lump sum early, this can be any date you choose, as long as you’ve over the minimum pension age (currently 55 and expected to rise to 57 from 2028) or unless you’ve qualified for ill health early retirement. We recommend contacting the Pensions Service Centre at least 3 months from the date that you want to retire.
The Pensions Service Centre will send you a retirement estimate that will tell you how much income for life and lump sum you are likely to get on the date you’ve chosen.
The letter will explain what you need to do. There will be some forms and information you need to provide to the Pensions Service Centre. Make sure to do this as soon as possible to help prevent any delays.
If you have stopped working for Royal Mail and/or stopped paying into the Collective Plan before 67 - you must get your income for life and lump sum by age 67. If you don’t get your income for life and lump sum before you turn age 67, these will automatically be put into payment with effect from your 67th birthday. Make sure to contact the Pensions Service Centre and complete the retirement forms before your 67th birthday, so they know where to make the payments. If we’re unable to put your income for life into payment at age 67, you will not get anything extra. You could receive backdated payments for missed payments up to a period of six years.
Find out more about when you can get your income for life and lump sum, if you’ve stopped working for Royal Mail and/or stopped paying into the Collective Plan.
For more information about the process to get your income for life and lump sum, see the Collective Plan’s Handbook or get in touch.
Getting your Additional Voluntary Contributions (AVCs) pot
The Pensions Service Centre will also send you information about taking your AVC pot, if you have one, with your retirement pack.
Page last updated 10 October 2024
Your regular monthly income for life payments from the Collective Plan are subject to income tax, just like your pay. But, unlike your pay, you won’t pay any National Insurance on your income for life. How much tax you pay depends on your own personal circumstances.
You’ll probably be able to get your lump sum tax free - for example, if you haven’t transferred out your income for life and aren’t subject to any tax restrictions.
Under current tax rules, most people can take up to a quarter (25%) of the total value of their savings under a pension scheme as a tax-free lump sum at retirement.
As a general summary, under the current tax rules, if your lump sum (including any booster payments) represents 25% or less of the total value of your lump sum plus your income for life (expressed as a lump sum) from the Collective Plan, then you should normally be able to receive your lump sum tax-free if you aren’t subject to any tax restrictions.
The Trustee cannot provide you with advice in relation to tax and your tax position will depend on your particular circumstances. If you’re unsure about your tax position, you can get independent financial advice.
If you have made Additional Voluntary Contributions (AVCs), you may be able to receive some or all of these tax-free alongside your lump sum, depending on your circumstances. Further details are given in the AVC Handbook.
How much tax you’ll pay will be worked out by HMRC based on your own situation.
How much tax you’ll pay will be worked out by HMRC based on your own situation. Your income for life and lump sum will be paid to you with any tax already taken from these payments - based on the tax code provided to us by HMRC.
If you live overseas, you may not be subject to UK income tax, but we must deduct it unless HMRC tells the Pensions Service Centre otherwise.
If you have a query about how your income or lump sum is taxed, you should contact HMRC using the following details:
Write to:
Pay As You Earn,
HM Revenue and Customs,
BX9 1AS
Call: 0300 200 3300
Page last updated 1 May 2024
But, deciding to transfer out is a big decision and one you shouldn’t take lightly.
If you decide to leave the Collective Plan before you get your income for life and lump sum, you could choose to transfer out what you’ve built up in the Collective Plan so far, including any Additional Voluntary Contributions (AVCs) that you’ve made.
As this is a new type of pension scheme in the UK you will need to think carefully about finding the right financial adviser who can help you understand what it means to you to transfer out and what you might be giving up by leaving the Collective Plan. It will take time for financial advisers to become ready to advise people on this type of pension scheme.
Yes. For example, you could transfer out what you’ve built up towards your income for life but keep what you’ve built up towards your lump sum.
However, you must transfer the value of your entire income for life or the entire value of your entire lump sum, or the entire value of your Additional Voluntary Contributions (AVCs). You cannot transfer only a part of what you’ve built up towards your income for life or lump sum, or AVCs, unless Royal Mail gives you permission to do so.
Any booster payments you’ve made must also be transferred out with your lump sum amount.
If you decide to transfer out what you’ve built up towards your income for life and you’ve made Additional Voluntary Contributions (AVCs), then these AVCs must be transferred out at the same time.
You’ll need to transfer your pension to:
a HMRC UK registered pension scheme, or
a Qualified Registered Overseas Pension Scheme, or
directly to an insurer to buy an annuity (a regular guaranteed income provided by an insurer).
The amount you’ll get as a transfer value will be your share of the Collective Plan’s assets at the time you transfer.
We’ll work this out based on the amount of money estimated to be needed to pay your benefits, compared to how much is estimated to be needed to pay everyone’s benefits. This is based on your age and the value of your income for life and lump sum, as well as estimates of the future values of these, including how well the Collective Plan’s investments will perform.
The transfer value for each £ per year of your income for life and lump sum is usually higher the older you are. For example, if a 66-year-old and a 20-year-old had built up the same amount of income for life and lump sum to date, the transfer value for the 66-year-old is usually much higher than the transfer value for the 20-year-old. This is because the Collective Plan needs to start paying benefits sooner for older members. For younger members, the investments will have more time to grow before their benefits are payable, and so it is estimated that not as much money needs to be held now to pay those benefits.
In other words, as members get closer to retirement, the transfer value would usually grow, until it is enough to meet the estimated cost of starting to pay their income for life and lump sum.
If you’re no longer paying into the Collective Plan, you can transfer out of the Collective Plan at any time before age 67. There’s no maximum age you can transfer your pension if you’re still paying into the Collective Plan.
But if you stop paying into the Collective Plan after age 67 (the Collective Plan’s Normal Retirement Age), you’ll need to let us know that you want to take a transfer immediately on leaving, otherwise you’ll get your income for life and lump sum.
Beware of scams
Scammers are increasingly trying to persuade savers to transfer their pension savings to unregulated or fraudulent schemes to steal their money.
To help you spot the signs and protect yourself from a scam, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) suggest the following four steps:
Reject any unexpected offers
This can be offers like free pension reviews or investment opportunities for your savings, and often originate from unsolicited text or social media messages.
Remember, a genuine adviser will never cold call you.
Check who you’re dealing with
The FCA’s ScamSmart website allows you to search for independent financial advisers and companies authorised by the FCA.
If you’re using online resources, always double-check the website address is the same as the address shown in any official communications.
Don’t feel pressured into making any quick decisions
If you’re contacted out of the blue by someone you don’t know offering you a “safe haven” for your pension, please don’t make any rushed decisions.
Get impartial financial advice before making any changes to your pension
It’s important to consider getting impartial financial advice, from a financial adviser authorised by the FCA before making any changes to your pension, especially if you’re looking to transfer out of the Collective Plan.
We’re required to review any transfer requests against The Pension Regulator’s traffic light system to help spot low, medium and high-risk transfers.
If you are transferring out and any amber or red flags are found, the Pensions Service Centre will contact you to explain their concerns and the next steps.
Visit The Pension Regulator’s scams section on their website or read The Pension Regulator’s scams warning leaflet for more information on staying safe from scams.
3 things to think about:
If you stop paying into the Collective Plan after age 67, you will get your income for life and lump sum straight away unless you tell us that you want to transfer out immediately on leaving.
Transferring out of the Collective Plan is a big decision. It’s also one you can’t change once you’ve done it. If you’re unsure, you can get independent financial advice. A financial adviser will also help you spot the signs of a scam.
As this is a new type of pension scheme in the UK you will need to think carefully about finding the right financial adviser who can help you understand what the impact of any decisions you make mean for you.
Page last updated 10 October 2024