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bogstandard wrote:whats the difference between a defined contribution pension and a defined benefit pension
Defined Benefit is when your pension based on the amount you earn and how long you stay in your job. They are usually based on either final salary or average salary. The RMPP is final salary upto April 2008 and career average salary from then onwards.
Defined Contribution is when you and your employer (or sometimes just you) pay into a pension pot and that money is then invested. When the time comes to retire you can either buy an annuity(income for life), commence drawdown or potentially take it all out in one go and spend it as you wish. But what you get will be dependant the amount deposited over the years and the investment return.
fly-catchers wrote:If this comes about does that mean your pension will be split into 3 sections? Final salary to 2008, them career average and them this latest one?
Yes it would be, and that is my worry. Possibly with a different pension age, which would defer payment until a later date. This will force many to retire even later as they will not be able to afford to go any earlier. Those that have taken their pensions early could just about have committed financial suicide in my opinion.. In our office we have a hard core of 40 something to fifty something year old staff who will become the next pension headache for RM. It really doesn't take much imagination to realise that RM will want to keep staff working longer to avoid paying out their pensions.
There is an important difference between defined benefit and defined contribution pensions with regard to the normal retirement ages of such schemes. DB tend to have specific NRA’s and you will suffer a reduction if taken before. While DC generally don’t because the returns aren’t fixed and what you get out will largely depend on how much you put in. So although DC usually provide less generous benefits, they are more flexible in terms of when and how you take your money.
I think what RM want is to reduce their outgoings while also having a reasonable idea of what their outgoings are going to be well into the future. A DC pension does that on both counts. While with a DB pension, the long term liabilities are an unknown factor to a certain extent because of increasing life expectancy, wage increases, etc. That’s why many companies have built up pension deficits and have closed their DB schemes over the years.
The fact that DC pensions aren’t as good will effectively mean that many people will be forced to work for longer, but ultimately whether you have to do that will come down to the individual.
RobertT wrote:There is an important difference between defined benefit and defined contribution pensions with regard to the normal retirement ages of such schemes. DB tend to have specific NRA’s and you will suffer a reduction if taken before. While DC generally don’t because the returns aren’t fixed and what you get out will largely depend on how much you put in. So although DC usually provide less generous benefits, they are more flexible in terms of when and how you take your money.
I think what RM want is to reduce their outgoings while also having a reasonable idea of what their outgoings are going to be well into the future. A DC pension does that on both counts. While with a DB pension, the long term liabilities are an unknown factor to a certain extent because of increasing life expectancy, wage increases, etc. That’s why many companies have built up pension deficits and have closed their DB schemes over the years.
The fact that DC pensions aren’t as good will effectively mean that many people will be forced to work for longer, but ultimately whether you have to do that will come down to the individual.
from your posting it sounds or reads as a worsening of our current pension and a benefit to RM , therefore i believe it will be introduced
Confused... You won't be, after the next episode of. SOAP
I'm taking a large amount of my pension this year. I don't understand any of it to be honest. I only know that my RM pension and my state pension won't even cover my rent and other neccesseties when I retire so I may as well take some cash now, enjoy my life and worry about being old if ever I can afford to retire which is looking unlikely.