Future of AVC

Hawkey99 · Post by **Hawkey99** » 01 Jan 2017, 12:28

Been trying to find out what is planned with the AVCs when Post Office scheme closes but can't find any information.

I assume our pension will be broadly the same as theirs with maybe a slight improvement due to the CMA/CWU campaign.

Has anybody heard or seen any information about AVC in the Post Office scheme.

Thanks

Post by **RobertT** » 01 Jan 2017, 14:49

As the number of Post Office employees this applies to is probably quite small, the information concerning it is going to be thin on the ground, as you have found with your other posts on these forums. Basically nobody seems to know what is going on with PO AVC’s!

However as the closure of the RMPP is expected to be formerly announced by RM fairly early in the new year, I’m sure there will be more info in due course about our own AVC’s.

Hawkey99 · Post by **Hawkey99** » 01 Jan 2017, 16:01

Thank Robert,

Lots of views of how ours will shape up. Some saying RM will be pushed to pay in more. Some saying scheme might survive a bit longer. Some that RM will just do exactly same as PO.

Any views or thoughts ???

mark.cup · Post by **mark.cup** » 01 Jan 2017, 18:41

I predict next Xmas we will be on strike like Post Office workers have been this year just passed...

I'm fairly surprised the union didn't get us all to stand together on this they were just the test run for doing it to us next! would have put out a very clear message but who knows what they think is the best course of action

Post by **RobertT** » 05 Jan 2017, 07:42

The future of AVC's is now covered in the Q&As thread:

http://www.royalmailchat.co.uk/communit ... 27&t=77960" onclick="window.open(this.href);return false;

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

Under the Company’s proposal, you would not build up any further Addplan pension after 31 March 2018. The Addplan pension you have built up would be revalued in line with RPI (up to 5% a year), as is currently the case for active Plan members while you remain employed by Royal Mail or until you take your benefits. Unless you instruct otherwise, your Addplan contributions would continue, but as additional contributions to your DC retirement account instead.

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.

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

Bonusplan contributions, both yours and the Company’s, would cease on 31 March 2018. However, as DC pensionable pay does not have a Lower Earnings Deduction, both you and the Company would pay contributions on your full basic pay to your DC retirement account.

Hawkey99 · Post by **Hawkey99** » 05 Jan 2017, 14:36

This bit could have been worse.......

Just the disaster pension but that goes with it.

Post by **milly** » 07 Jan 2017, 11:06

RobertT wrote:The future of AVC's is now covered in the Q&As thread:

http://www.royalmailchat.co.uk/communit ... 27&t=77960" onclick="window.open(this.href);return false;

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

Under the Company’s proposal, you would not build up any further Addplan pension after 31 March 2018. The Addplan pension you have built up would be revalued in line with RPI (up to 5% a year), as is currently the case for active Plan members while you remain employed by Royal Mail or until you take your benefits. Unless you instruct otherwise, your Addplan contributions would continue, but as additional contributions to your DC retirement account instead.

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.

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

Bonusplan contributions, both yours and the Company’s, would cease on 31 March 2018. However, as DC pensionable pay does not have a Lower Earnings Deduction, both you and the Company would pay contributions on your full basic pay to your DC retirement account.

I take it you may as well transfer your existing AVC funds into the new DC Pension as your AVC payments will go into your DC Pension anyway.

Post by **RobertT** » 07 Jan 2017, 13:21

You probably could transfer if you wanted to but there wouldn’t be any point. Because by keeping your AVC’s where they are you can take all of their value tax free, assuming they equal 25% or less of your overall RMPP value. By transferring them into your DC pension you are only guaranteed to be able to take 25% of that pot tax free, with the rest being treated as income. So transferring could mean you pay more tax than you need to. More info on DC pots here: https://www.moneyadviceservice.org.uk/e ... on-schemes" onclick="window.open(this.href);return false;

The important thing to do is treat your RMPP + AVC’s as one pension pot and the new DC pension as a completely separate pot, they are not connected in any way other than both being provided by RM.

Post by **milly** » 07 Jan 2017, 14:12

RobertT wrote:You probably could transfer if you wanted to there wouldn’t be any point. Because by keeping your AVC’s where they are you can take all of their value tax free, assuming they equal 25% or less of your overall RMPP value. By transferring them into your DC pension you are only guaranteed to be able to take 25% of that pot tax free, with the rest being treated as income. So transferring could mean you pay more tax than you need to. More info on DC pots here: https://www.moneyadviceservice.org.uk/e ... on-schemes" onclick="window.open(this.href);return false;

The important thing to do is treat your RMPP + AVC’s as one pension pot and the new DC pension as a completely separate pot, they are not connected in any way other than both being provided by RM.

Thank you for the reply.
Would it best to carry on paying into the AVC after March 2018 or will I be able to pay more into the DC Pension and would Royal Mail pay 10% towards any extra contributions?

Post by **RobertT** » 07 Jan 2017, 15:55

milly wrote:Thank you for the reply.
Would it best to carry on paying into the AVC after March 2018 or will I be able to pay more into the DC Pension and would Royal Mail pay 10% towards any extra contributions?

As per the quote you quoted:

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

Under the Company’s proposal, you would not build up any further Addplan pension after 31 March 2018. The Addplan pension you have built up would be revalued in line with RPI (up to 5% a year), as is currently the case for active Plan members while you remain employed by Royal Mail or until you take your benefits. Unless you instruct otherwise, your Addplan contributions would continue, but as additional contributions to your DC retirement account instead.

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.

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

Bonusplan contributions, both yours and the Company’s, would cease on 31 March 2018. However, as DC pensionable pay does not have a Lower Earnings Deduction, both you and the Company would pay contributions on your full basic pay to your DC retirement account.

RM are not planning on paying in any extra contributions.

Post by **milly** » 07 Jan 2017, 18:47

RobertT wrote:You probably could transfer if you wanted to but there wouldn’t be any point. Because by keeping your AVC’s where they are you can take all of their value tax free, assuming they equal 25% or less of your overall RMPP value. By transferring them into your DC pension you are only guaranteed to be able to take 25% of that pot tax free, with the rest being treated as income. So transferring could mean you pay more tax than you need to. More info on DC pots here: https://www.moneyadviceservice.org.uk/e ... on-schemes" onclick="window.open(this.href);return false;

The important thing to do is treat your RMPP + AVC’s as one pension pot and the new DC pension as a completely separate pot, they are not connected in any way other than both being provided by RM.

If you transferred the AVC into the DC Pension you wouldn't necessarily pay more tax if you were to take your RMPP and DC pension at the same time as it would still be 25% tax free on all of your Pensions combined.
Also is there any point paying into AVC's after March 2018 or would it be better to just put any extra cash into the DC Pension.

Post by **RobertT** » 07 Jan 2017, 19:03

milly wrote:If you transferred the AVC into the DC Pension you wouldn't necessarily pay more tax if you were to take your RMPP and DC pension at the same time as it would still be 25% tax free on all of your Pensions combined.

You can’t take 25% of your combined pensions. It is 25% of your RMPP+AVC’s pot and then another 25% of the DC pot. They are treated as completely different schemes. That is 'pension law'. Have a look at page 9 in the booklet we received.

Also is there any point paying into AVC's after March 2018 or would it be better to just put any extra cash into the DC Pension.

You will not be able to pay into AVC’s after 31st March 2018. If you want to pay extra it will have to go into the DC scheme.

Post by **milly** » 07 Jan 2017, 19:36

RobertT wrote:
milly wrote:If you transferred the AVC into the DC Pension you wouldn't necessarily pay more tax if you were to take your RMPP and DC pension at the same time as it would still be 25% tax free on all of your Pensions combined.
You can’t take 25% of your combined pensions. It is 25% of your RMPP+AVC’s pot and then another 25% of the DC pot. They are treated as completely different schemes. That is 'pension law'. Have a look at page 9 in the booklet we received.

Also is there any point paying into AVC's after March 2018 or would it be better to just put any extra cash into the DC Pension.
You will not be able to pay into AVC’s after 31st March 2018. If you want to pay extra it will have to go into the DC scheme.

Sorry I think you misunderstood,I meant if you transferred the funds from the AVC into the DC Pension you would be able to take 25% of that tax free as it would just be the DC Pension only and you could also take 25% of the RMPP Pension.

Post by **nataddick** » 07 Jan 2017, 20:28

Milly, I can see no logical reason why anyone would want to transfer their Flexiplan AVC fund,as at 31/03/2018,into the proposed DC plan as you would potentially lose the option to take the whole of the AVC fund as tax free cash and thereby secure an improved residual pension.I am in full agreement with Robert on this point and I am alarmed that so many members fail to understand how the Flexiplan works. I appreciate that references concerning the treatment of existing Flexiplan AVC funds are very vague in the 2018 Big Red Book. There are firm references to the fact that pension benefits from April 2018 could be either in a new section of the RMPP or in the RMDCP but no reference is made as to the options available for existing Flexiplan members who have built up a pot for future use. It is a question I will be raising via the feedback channel !

Post by **milly** » 07 Jan 2017, 20:59

nataddick wrote:Milly, I can see no logical reason why anyone would want to transfer their Flexiplan AVC fund,as at 31/03/2018,into the proposed DC plan as you would potentially lose the option to take the whole of the AVC fund as tax free cash and thereby secure an improved residual pension.I am in full agreement with Robert on this point and I am alarmed that so many members fail to understand how the Flexiplan works. I appreciate that references concerning the treatment of existing Flexiplan AVC funds are very vague in the 2018 Big Red Book. There are firm references to the fact that pension benefits from April 2018 could be either in a new section of the RMPP or in the RMDCP but no reference is made as to the options available for existing Flexiplan members who have built up a pot for future use. It is a question I will be raising via the feedback channel !

I understand how the Flexiplan works but who's to say that my AVC funds wouldn't be better deployed in the new DC Pension as it could possibly outperform the RMPP.
We will just have to wait and see what will happen to the AVC funds as you are correct that information very vague to say the least.