Future of AVC

[RobertT]

You can ask for a lump sum quote and therefore pay in a lump sum whenever you want. If that's in May the quote will only be based on only a few weeks pay, if it's in February it'll be based on around 10 months pay. There is nothing stopping you from paying in more than one lump sum per tax year. Obviously if you want to pay extra in Feb/March and you've already paid a lump sum in September, that will be taken intro account.

I think it's been over 10 years since i last put a lump sum into my Flexiplan, which was before Zurich took them over. And at the time you could only put in one lump sum per year which was at the end. I always got a refund via payroll. But by what foxyjarvis says, it may well be a litle different now.

[heapsy]

So just to be clear.

We will have 2 completely separate schemes.

You will no longer be able to pay any AVCs into your NRA 60 or NRA 65.

You will be able to continue to make AVC payments but these will ultimately be added to your new DC into scheme and then you have the same options as now..

Is that right.....?

You can continue to pay AVCs into the NRA65 Defined Contribution pension, but not the NRA60. Question 21, page 15 of the Pension Review.

[RobertT]

So just to be clear.

We will have 2 completely separate schemes.

You will no longer be able to pay any AVCs into your NRA 60 or NRA 65.

You will be able to continue to make AVC payments but these will ultimately be added to your new DC into scheme and then you have the same options as now..

Is that right.....?

You can continue to pay AVCs into the NRA65 Defined Contribution pension, but not the NRA60. Question 21, page 15 of the Pension Review.

Question 21 actually says:

21. I am paying additional contributions to Flexiplan – what impact does the Company’s proposal have on me?

Unless you instruct otherwise, your Flexiplan contributions would continue, but as additional contributions to your DC retirement account instead.

There will be no such thing as 'the NRA65 DC pension'.

The NRA65 pension will be 'closed' to future accruals in a similar way to how the NRA60 is already 'closed'. From 1st April 2018 we will have a DC scheme going forward. Any additional contributions over the basic 6% will go into the new DC pension.

When you decide to take your DC pension you will have a number of options which are totally different to the options you have with the current RMPP(NRA60 & NRA65). You could for example, take your DC pot any time after 55 and leave the existing NRA60 & NRA65 untouched.

[heapsy]

So just to be clear.

We will have 2 completely separate schemes.

You will no longer be able to pay any AVCs into your NRA 60 or NRA 65.

You will be able to continue to make AVC payments but these will ultimately be added to your new DC into scheme and then you have the same options as now..

Is that right.....?

You can continue to pay AVCs into the NRA65 Defined Contribution pension, but not the NRA60. Question 21, page 15 of the Pension Review.

Question 21 actually says:

21. I am paying additional contributions to Flexiplan – what impact does the Company’s proposal have on me?

Unless you instruct otherwise, your Flexiplan contributions would continue, but as additional contributions to your DC retirement account instead.

There will be no such thing as 'the NRA65 DC pension'.

The NRA65 pension will be 'closed' to future accruals in a similar way to how the NRA60 is already 'closed'. From 1st April 2018 we will have a DC scheme going forward. Any additional contributions over the basic 6% will go into the new DC pension.

When you decide to take your DC pension you will have a number of options which are totally different to the options you have with the current RMPP(NRA60 & NRA65). You could for example, take your DC pot any time after 55 and leave the existing NRA60 & NRA65 untouched.

True, but the point is you cannot take the AVCs at 60, as is currently the situation. Some people might not realise this. Although it isn't actually part of the NRA65 pension as it is now, they will be drawn at the same time. That is an important point to remember. I think the problem is that many are very confused by the whole pension thing. Although my answer might not be entirely accurate, it IS important to spell things out in language that people understand, as you and I do. It means that contributions from 1st April 2018 will automatically be part of the latter pension. Those who were hoping to add more to their AVCs, in the hope of retiring at 60, will be in for a shock.

[RobertT]

True, but the point is you cannot take the AVCs at 60, as is currently the situation. Some people might not realise this. Although it isn't actually part of the NRA65 pension as it is now, they will be drawn at the same time. That is an important point to remember. I think the problem is that many are very confused by the whole pension thing. Although my answer might not be entirely accurate, it IS important to spell things out in language that people understand, as you and I do. It means that contributions from 1st April 2018 will automatically be part of the latter pension. Those who were hoping to add more to their AVCs, in the hope of retiring at 60, will be in for a shock.

You can take your current AVC’s (Bonusplan & Flexiplan) either at the same time as your main RMPP benefits, and so help to fund the maximum tax free lump sum, which could be any time after 55. Or it is possible to transfer your AVC funds to another pension provider if you wish, and tale them totally independently of the RMPP, although there’s no logical reason to do so.

You will also be able to access your new DC pension plus any additional payments you make into it from age 55. You don’t even have to take it all in one go. Under ‘pension flexibility’ you can dip into that fund whenever you want(after 55).

[heapsy]

I would like to take whatever AVCs I have at 60. With this in mind, and baring in mind we only have about 14 months of contributions to add, I'm wondering if I should switch my payments into the lifestyle fund. I currently spread them across the growth, balanced and cautious funds. If I stop my payments near to the closure of the NRA65 pension, am I better off making the switch then or now, into, I was thinking, the lifestyle fund? Any ideas would be most helpful. Thanks.

[RobertT]

I would like to take whatever AVCs I have at 60. With this in mind, and baring in mind we only have about 14 months of contributions to add, I'm wondering if I should switch my payments into the lifestyle fund. I currently spread them across the growth, balanced and cautious funds. If I stop my payments near to the closure of the NRA65 pension, am I better off making the switch then or now, into, I was thinking, the lifestyle fund? Any ideas would be most helpful. Thanks.

The ‘Lifestyle Option’ is not a fund, it’s a way of transferring your money into more stable investments as you approach retirement age. It starts off with 100% in the Growth fund and when you are within 8 years of your chosen retirement age, it gradually transfers them into the other funds; Balanced, Cautious & Cash. So to some extent it sounds as if you’re already ‘lifestyling’!

The idea is that as you near retirement you lock in the gains you’ve made in the Growth fund, and so you’re less likely to suffer any nasty falls due to stock markets fluctuations.

Whether it’s better to go the Lifestyle route or be more proactive and transfer when you think the time is right, is a personal decision. With stock markets being at a high level at the moment it might be good time to get out of Growth if you’re not too far from 60. Equally markets might increase even more and you might miss out on more gains. Nobody can say for sure what the best course of action is, because nobody knows what’s around the next corner.

There is an in depth guide on AVC investment options available here: http://www.royalmailpensionplan.co.uk/s ... an/library" onclick="window.open(this.href);return false;

[Hawkey99]

Future of AVC
Postby RobertT » Tue Jan 17, 2017 1:07 pm

You can ask for a lump sum quote and therefore pay in a lump sum whenever you want. If that's in May the quote will only be based on only a few weeks pay, if it's in February it'll be based on around 10 months pay. There is nothing stopping you from paying in more than one lump sum per tax year. Obviously if you want to pay extra in Feb/March and you've already paid a lump sum in September, that will be taken intro account.

Hi Robert,

As previously mentioned on the thread, the later in the year you ask for an AVC payment lump sum quote the better as this allows you to pay in a higher amount to pay in.

When you are asking for a lump sum quote what are they actually quoting you. Is it the most you can pay in that year to stay with PSE or something else.

Many thanks as always.

[RobertT]

When you are asking for a lump sum quote what are they actually quoting you. Is it the most you can pay in that year to stay with PSE or something else.
Many thanks as always.

I haven’t had any recent personal experience of paying in lump sums. The last time I did it you could only pay in one towards the end of the tax year and that was way before PSE came along.

But my understanding of what others have posted, is that for weekly contributions they give you a quote for the maximum contribution you can make. It’s then up to you to work out whether you’ll stay within the limits for PSE by paying that maximum amount, or if you’ll have to pay a lesser amount instead.

As far as I know you only benefit from PSE if you make regular weekly contributions, you don’t get that benefit when putting in a lump sum, so PSE would not be a consideration.

[Hawkey99]

Thanks Robert.

Does PSE make a specific % difference to the count you pay in or how would this work ??

[RobertT]

Thanks Robert.
Does PSE make a specific % difference to the count you pay in or how would this work ??

If your pay goes below the minimum wage or if your total yearly pay is likely to drop below £10,000, then you will automatically be excluded from PSE. It seems that RM don’t tell us whether that’s likely to happen, so it’s up to the individual to make sure their weekly pension contributions aren’t too high.

Any other tax efficient payments you might be making will also have to be taken into account, such as things via My Bundle. They will effectively reduce the amount you can pay into AVC’s while staying within the limits for PSE.

In money terms and based on what others have posted on these forums, a figure of around £120-130 per week seems to be the maximum allowable to stay within the PSE limits. But I would suggest you use that as a ball park figure because it will obviously depend on the individual to a large extent.

Full PSE details are in the booklet we all received, or more info is here: https://www.myroyalmail.com/node/6791" onclick="window.open(this.href);return false;

My Bundle details are here: https://www.myroyalmail.com/benefits" onclick="window.open(this.href);return false;

As you’re allowed to pay in 100% of your earnings into a pension each tax year, it makes sense to put in as much into weekly AVC’s as you can while staying within the limits for PSE. Because each £100 gross contribution effectively only costs £68, with £20 being taken off your income tax bill in the form of tax relief, and £12 off the NIC’s you pay for PSE.

As far as I know lump sums don’t benefit from PSE, just tax relief. So a £100 gross contribution would be costing you £80. Therefore it makes sense to max out your weekly contributions before you make any lump sums.

You can pay in a lump sum at any time during the tax year. The quote you’re given will be based on how much you’ve earned at that particular date, and should factor in any other lump sum payments you’ve made plus both your regular RMPP payments and your weekly AVC contributions.

But again based on what others have said, I would suggest you make your own calculations rather than relying on what your quote says. There was somebody who paid in £6k too much because their lump sum quote didn’t factor everything in!

[heapsy]

Thanks Robert.
Does PSE make a specific % difference to the count you pay in or how would this work ??

If your pay goes below the minimum wage or if your total yearly pay is likely to drop below £10,000, then you will automatically be excluded from PSE. It seems that RM don’t tell us whether that’s likely to happen, so it’s up to the individual to make sure their weekly pension contributions aren’t too high.

Any other tax efficient payments you might be making will also have to be taken into account, such as things via My Bundle. They will effectively reduce the amount you can pay into AVC’s while staying within the limits for PSE.

In money terms and based on what others have posted on these forums, a figure of around £120-130 per week seems to be the maximum allowable to stay within the PSE limits. But I would suggest you use that as a ball park figure because it will obviously depend on the individual to a large extent.

Full PSE details are in the booklet we all received, or more info is here: https://www.myroyalmail.com/node/6791" onclick="window.open(this.href);return false;

My Bundle details are here: https://www.myroyalmail.com/benefits" onclick="window.open(this.href);return false;

As you’re allowed to pay in 100% of your earnings into a pension each tax year, it makes sense to put in as much into weekly AVC’s as you can while staying within the limits for PSE. Because each £100 gross contribution effectively only costs
£68, with £20 being taken off your income tax bill in the form of tax relief, and £12 off the NIC’s you pay for PSE.


As far as I know lump sums don’t benefit from PSE, just tax relief. So a £100 gross contribution would be costing you £80. Therefore it makes sense to max out your weekly contributions before you make any lump sums.

You can pay in a lump sum at any time during the tax year. The quote you’re given will be based on how much you’ve earned at that particular date, and should factor in any other lump sum payments you’ve made plus both your regular RMPP payments and your weekly AVC contributions.

But again based on what others have said, I would suggest you make your own calculations rather than relying on what your quote says. There was somebody who paid in £6k too much because their lump sum quote didn’t factor everything in!

I recently posted on this subject. I have a couple of weeks in which I dropped out of PSE. I contacted Payroll. The calculation to remain within PSE is as follows. Basic pay £412.30 - AVC contributions. The figure must NOT be below £292 per week for a full timer.
You cannot include shift allowances, in my case delivery supplements. I have had to adjust my payments accordingly and will leave it at that. As I have shares, a stocks and shares ISA, cash ISA, and some AVCs, I should have a decent amount of cash. Hope this helps to clear things up. Pensions don't really give you much info when you ring them.