Pension scheme and new part time starters

[steveirwin]

Hi I have recently joined Royal mail, I am part time and my contract is for 1 year only. I have recently received my contract of employment (a document that could be written in a far more positive way in my opinion) and it clearly states that in 1 years time I am out of a job. No if buts maybes, by signing the document I am effectively giving 1 years notice. Now because of my age I am automatically enrolled into the pension scheme after 3 months. I wont give the figures but you can see that in 9 months on a part time salary my pension pot might reach 5 figures. Two of them after the decimal point. The cost to Royal mail to administer this, then provide me with the pension should I wish to take it, will be enormous.

Am I missing something, can I opt out of the royal mail scheme completely or do I have to go in even though Royal mail is stating my contract ends in 12 months.

[RobertT]

I don’t know the content of your contract, but I would assume it’s a fixed term one that could be extended if the company wish?

You can opt out of the pension if you want but why do you want to give up ‘free money’? I appreciate, and if I understand the RMDCP properly, as a new starter you’ll only be paying in 1% and only getting another 1% from RM initially. But something is better than nothing.

And if you get the chance of extending your contract after 12 months, which you may well do, you can increase yours and so RM contributions up to a maximum of 6%(you) and 9%(RM).

I wouldn’t have thought the costs of administering the scheme was relevant to you.

More info on the RMDCP can be found in the plan guide here: http://www.zurich.co.uk/internet/worksa ... 714073.pdf" onclick="window.open(this.href);return false;

[steveirwin]

Robert,

Thanks for the reply and you're correct I am getting something for a low cost to me but the wording of the contract does not offer any hint of an extension to the contract, one of the reasons why I feel it is not written in a way to give positive vibes to any one starting with RM.

You are possibly correct, I may be asked if I want to stay on after 12 months, but the contract doesn't say that and even if it was to occur would it be on another short term fixed contract.

I wouldn’t have thought the costs of administering the scheme was relevant to you.

I have to disagree on that, there are probably hundreds of people in the same position as me, so the RM scheme cost is high and any cost is either taken out of the plans profits or the companies profits so it does impact all of us In some way.

That said I am sure some accountant somewhere has worked out this is the cheapest way of doing it.

[RobertT]

Royal Mail employ people on fixed term contracts these days and have done for some time now. Personally I have never known anyone to just leave at the end of it – they have always had their contract extended. Although that is based on just my delivery office of around 100 staff.

By law every company that employs over a certain number of staff has to automatically enrol its employees into a pension scheme. Even those with just one member of staff will need to by 2018! You have to specifically opt out if you don’t want to join up.

The way it worked for RM was that in 2013 everyone who wasn’t already in a RM pension scheme was enrolled into the Royal Mail Defined Contribution Plan. New starters will normally be enrolled after 3 months or if not after 12 months. Anyone else who has opted out at some point will automatically be enrolled every 3 years, unless they opt out again.

There will be costs and hassle to enrol each new starter, but equally they’ll be costs and hassle when someone opts out aswell, or when someone increases their contribution levels, etc. The RMDCP is administered by Zurich and there maybe some sort of payment from RM for them to do that. If not Zurich make their money by taking a %age of your pension value each year anyway.

The pension that any company offer forms part of your overall pay package, by opting out you’re effectively giving yourself a pay cut, however small the contribution levels may be.