CDC not compulsory?

[badger1]

I phoned Scottish Widows today to start the transfer of my pension I don’t wish to join the CDC scheme. The very helpful lady said that as far as she knew the current scheme would continue alongside CDC. Which means we can continue with AVC’s too!

[RobertT]

CDC will not be compulsory, but unless something changes the plan is that all current RM pension arrangements will stop and everyone will be put into CDC, unless they choose to opt out.

In the 4 Pillars document(page 8), it says:

..... we have jointly agreed to introduce one new wage in retirement pension scheme for all CWU represented grades in the RMG to replace the current DB and DC Schemes.

https://www.cwu.org/wp-content/uploads/ ... ow-res.pdf

[badger1]

Not according to Scottish Widows! They say the scheme will continue for those not wishing to join CDC.

[RobertT]

It's also mentioned somewhere on this link: https://www.myroyalmail.com/2018pensionreviewqanda

I'm inclined to believe communications from the CWU and RM over a lady in a call centre who works for another company.

[badger1]

Possibly, but I did ask her to check and she asked her manager who confirmed it. They seemed very sure

[badger1]

They whole thing has been communicated terribly, no one really knows much in the work place and most would rather not join CDC. I biggest problem is nobody really trusts Royal Mail when it come to pensions

[RobertT]

Possibly, but I did ask her to check and she asked her manager who confirmed it. They seemed very sure.

I don't know how they can be sure when all the official literature says it's CDC or nothing, and SW won't have anything to do with it anyway.

They whole thing has been communicated terribly, no one really knows much in the work place and most would rather not join CDC. I biggest problem is nobody really trusts Royal Mail when it come to pensions

There hasn't been much specific info because at the moment there's no specific info to give – the RM CDC scheme doesn't exist yet, and won't until all the legislation and regulations have been sorted.

I expect we'll get one of those A4 booklets with all the details on CDC and what will happen with the existing RM pension arrangements in due course.
I haven't got a clue when that will be, but it might be towards the end of this year if we're lucky.

In the meantime, have a look at the 'pension plan websites stickie', there are some links to what CDC is all about.

As for opting out of CDC, personally I think you'd be mad because you'd be saying no to the contributions from RM.

Based purely on contributions going in and no increases or decreases in benefits or the effects of inflation, at the NRA of 67 I would expect to receive about 90% of my net contributions back(when factoring in tax relief and PSE) from the tax free lump sum. With the pension itself making up the remaining 10% within about 4 months of initially drawing it.
Everything from then on is 'profit'.

Or to put it another way: a full timer on £458 would have £90 per week going into their CDC pension, for a net cost of £18 to them, when factoring in tax relief and PSE.
Therefore if you opt out that £18 is all you'll be getting in your take home pay each week and you'll be giving up £72 in contributions from RM and the taxman.

Some people will call that free money and some will call it deferred wages, but either way over the course of time you'll be saying no to a considerable sum of money.

It's expected there will also be the option to transfer out your share of the overall CDC pot to a DC scheme, which is the logical way to go for those who would rather have a DC plan.
As I don't expect to be in the CDC scheme for more than a year or so, I definitely plan to look into the possibility of transferring myself.