MRM.COM : Committed to providing the best retirement benefits in the industry

[heapsy]

I agree that lots of people don’t seem to know the basics, although from his posts on here I don’t think mark.cup is one of them.

I would have thought a simple read of their annual statement would educate many of the way their pension works.

I too know quite a few people who are living a long retirement, my dad being one. He’s 87 this year and retired when he was 56.

Thanks RobertT was just a general question as like yourself you plan around the current scheme then they try and change it and put out hardly any info on how we will all be affected especially the few of us who want to give ourselves the best possible chance of a decent retirement income!

I do think it's very likely a cash balance scheme will reduce the benefits of AVC's re maximising the 25% lump sum and a bigger pension as the new scheme is trying to mimic what we have been doing already without building extra monthly income?

Remember that AVCs are over and above your pension total. If for example you had £100k in your pension pot, you are entitled to take £25k tax free, with £75 left to provide your monthly pension. If you also had £10k of AVCs stashed away, then your total pot is now £110. This allows you to take £27.5k. Also, you then have 82.5k to provide your monthly pension, instead of only £75k in the original. Many people will have bigger pots. Mine, as of last years statement was around £160k. £152k of which was in the NRA60. RobertT was right earlier when he mentioned the type of pension or annuity as they are also called, you might take. Index linking by 3% or 5% are usually available, as are impaired life annuities, for those with serious conditions such as cancer or heart conditions. That would be a decision to be taken at the time you draw your pension. In a way, that could be to your advantage. For example, if you are single or widowed at the time you take a pension, why would you need a widows pension? A single life annuity would almost certainly pay MORE, as the pension company do not have to provide for someone else, after you have died. When the time comes you will need to take advice as to which type of pension you take. I have mixed my options with AVCs and ISAs and a private pension to give me more choice. Read my comment regarding the proposed pension from RM and their pathetic attempt to con people over the lump sum issue., reposted below.

What a load of tripe. The way this has been worded implies no need to take a lump sum, as one is already provided. THAT is a complete lie, and the CWU and CMA/Unite should make a legal challenge on that. A lump sum, up to 25% of your total pension pot is an OPTION. You do not have to take the lump sum, as this will reduce your monthly income AND subsequent annual increases. You can, in fact, take a smaller lump sum than 25%, giving you a bit of both.

[mark.cup]

Yes totally agree re pooling the the value of the Royal Mail pension and the AVC then taking the maximum 25% and hopefully all funded from the AVC is the most effective use of the money.

If I'm being honest (selfish) I would prefer a smaller build up in guaranteed monthly pension as apposed to the cash balance scheme!

But have heard people say stuff like I'm only interested in a lump sum and not bothered at all about a monthly pension which is total madness how do you live after you have blown the lot?

I'm sure the union are working hard in the background and I think they've said no deal come August and it's ballot time

[RobertT]

Thanks RobertT was just a general question as like yourself you plan around the current scheme then they try and change it and put out hardly any info on how we will all be affected especially the few of us who want to give ourselves the best possible chance of a decent retirement income!

I do think it's very likely a cash balance scheme will reduce the benefits of AVC's re maximising the 25% lump sum and a bigger pension as the new scheme is trying to mimic what we have been doing already without building extra monthly income?

Without the benefit of any hard and fast info we can only guess what will happen. But I would have thought the only guaranteed element of the Cash Balance scheme is the sum total of the contributions going into it, with the addition of investment growth if things go well. By the sound of it, it will work in a similar way to a With Profits fund. The problem with that of course is that they are largely obsolete and discredited these days.

The CB scheme will probably benefit those who have either no or only a small amount of AVC’s already saved because they’ll benefit from a higher income for the rest of their lives and they’ll get the lump sum that most people take aswell. But those with quite large AVC pots will be hindered by it, so the completely separate DC plan would probably be the way to go for them.

[RobertT]

Remember that AVCs are over and above your pension total. If for example you had £100k in your pension pot, you are entitled to take £25k tax free, with £75 left to provide your monthly pension. If you also had £10k of AVCs stashed away, then your total pot is now £110. This allows you to take £27.5k. Also, you then have 82.5k to provide your monthly pension, instead of only £75k in the original.

The value of your main scheme benefits in money terms is largely irrelevant as far as funding your pension is concerned because that's the responsibility of RM and the government.You can only take as much pension as you’ve accrued at retirement! Your AVC pot increases the amount of tax free lump sum you can take, but it doesn’t increase the maximum amount of monthly/yearly pension you’re entitled to from the RMPP. It just means your not losing as much guaranteed pension when taking the lump sum, as you would have done without having AVC's Although you can use your AVC's to buy an annuity if you want.

For example: Your pension is £5k per year, that’s multiplied by 20 to give a total value of £100k – you can take a £25k lump sum from that, leaving a pension of 75% of £5k which equals £3,750 per year.

However if you have £10k in AVC’s, then the total value is £110k – you take a lump sum of £27.5k(25%) of which £10k is made up of the AVC’s. Therefore you’ll have a residual pension of £4,125 per year from the RMPP.

[FAB]

Do most people go for lump sums because they have no other savings? Or does the 25% tax free part of it give you more overall money than if it is was taken over a longer period as pension. I have a fairly small amount in an AVC but have been building up a good sized S&S ISA, so I intend to take my Section C pension in whole rather than give up a part of it in a lump sum. As I guess that is always better than losing some to a lump sum?

Looking at the new CB scheme , until RM give loads more details I cannot see how it differs from the DC one. As both seem to just give cash at the end and not an actual pension.

[RobertT]

Do most people go for lump sums because they have no other savings? Or does the 25% tax free part of it give you more overall money than if it is was taken over a longer period as pension. I have a fairly small amount in an AVC but have been building up a good sized S&S ISA, so I intend to take my Section C pension in whole rather than give up a part of it in a lump sum. As I guess that is always better than losing some to a lump sum?

Whether you gain by taking the lump sum or the bigger pension will ultimately depend on how long you live, which is something that nobody really knows. But in general and based on average life expectancy, you’ll get more in total by taking the larger pension.

The reasons why a majority of people take the lump sum will be individual, but in my opinion a lot are just blinded by the £££ signs.

Looking at the new CB scheme , until RM give loads more details I cannot see how it differs from the DC one. As both seem to just give cash at the end and not an actual pension.

You’re not far wrong, but it seems that the CB scheme will be tied to when you take your main RMPP benefits. While the DC scheme is totally separate and you’ll have the flexibility to access it anytime after 55, under current rules.

[BeamishStout]

I am glad that my intended date of retirement (60th birthday) falls a few days after the current DB closes. I am satisfied that I know quite accurately how much pension I will receive from RM (NRA60 + reduced NRA65) and my deferred pension (from previous occupation that will be payable from 60). I know what my AVCs are worth now and what they will be worth in 9 months time (present value + remaining contributions till April 2016) excluding any gains/losses. The AVCs I intend using to maximize the tax-free lump sum to supplement my existing ISAs. All this is not going to change materially between now and 2018.

My observations of the RM retirement benefits link, which is where this thread started, is that it smacks of 'smoke and mirrors'. What might not be clear to many members are the underlying assumptions of their figures. The £25K salary often quoted in their figures and the fact that figures assume you keep working till 65 are two of the obvious shortcomings. Had I been 55 instead of 59, I don't really know which scheme (DC or CB) would be better for me in the years until retirement. And how the AVC's would factor in .... It seems that many of my present colleagues are already stumbling towards retirement under the present DB scheme so lord knows what they (and I) will/would make of the post 31st March arrangements.

[fly-catchers]

I am glad that my intended date of retirement (60th birthday) falls a few days after the current DB closes. I am satisfied that I know quite accurately how much pension I will receive from RM (NRA60 + reduced NRA65) and my deferred pension (from previous occupation that will be payable from 60). I know what my AVCs are worth now and what they will be worth in 9 months time (present value + remaining contributions till April 2016) excluding any gains/losses. The AVCs I intend using to maximize the tax-free lump sum to supplement my existing ISAs. All this is not going to change materially between now and 2018.

My observations of the RM retirement benefits link, which is where this thread started, is that it smacks of 'smoke and mirrors'. What might not be clear to many members are the underlying assumptions of their figures. The £25K salary often quoted in their figures and the fact that figures assume you keep working till 65 are two of the obvious shortcomings. Had I been 55 instead of 59, I don't really know which scheme (DC or CB) would be better for me in the years until retirement. And how the AVC's would factor in .... It seems that many of my present colleagues are already stumbling towards retirement under the present DB scheme so lord knows what they (and I) will/would make of the post 31st March arrangements.

Yes for once in my life I am glad I am almost 60 and the exit door is in sight!! When I see some of my colleagues who are 30 (the age I joined) I dread to think what their retirement will be like. And younger people joining now on P/T hours or less- Help!