CDC...a solution for us or them?

[fishtank]

Having read a bit about these schemes and pretty much stalked Hillary Salt for the last couple of weeks I've been looking to put the pieces of the puzzle together.

I'm a big fan of motives, everyone has one and once you find the motive the truth isn't far behind.

The union seems sold on this scheme although I'm not sure if they read past the word collective but their motive has always been clear, one pension for all no matter how shite it is. Box ticked...job done.

What bothered me was Royal Mail's enthusiasm for the scheme, I assumed that they would have preferred to continue with the individual DC scheme and just bunged everyone in there. It makes sense and the union told us that was the case.

What I've since found out mostly it has to be said from reading stuff Hillary Salt herself has written is that there is an inherent flaw in an individual DC scheme which employers fear and that is people just won't f**k off and die quietly. They either won't or can't afford to retire.

Since you have the freedom to do what you like with your IDC pension instead of wasting it on a poor value annuity people are leaving it invested and drawing down small amounts or keeping it as a nest egg for their children....and continuing to work. This has HR departments in a state of panic, you can't force them to retire and you can't get many parcels on a Zimmer frame, what do we do with the Octogenarians at the Christmas party? Who will deliver Jack's birthday card from the Queen , Jack might.

The answer appears to be the CDC scheme, for the employee all of the risk of a DC scheme with none of the freedom, for the employer...No risk and pretty much an enforced pension that will make working past 67 not so much fun when you see how much tax you're paying.

I would suggest that Royal Mail are pretty happy right now having solved two problems at once, laughing all the way to the bank.

[heapsy]

An interesting and thought provoking post. You forgot to mention that as people cannot or will not work until 67, then their pension wont be that great. That's why I've gone down the S&A ISA route to bridge the gap. Talking to one or two in our office, it seems the union are working hand in hand with RM on this. Neither wants to deal with the problem long term. My greatest fears are about to come true I think. No incentive to invest in riskier, higher growth funds. The target growth of 2.5% should be an absolute minimum, not a target, which I fear, may become a ceiling instead. What happens to the middle aged staff who wont get 25 or 30 years in this scheme, and who have accumulated wear and tear on their bodies through the years? And why are the union happy to have their members working until 67? FFS! I am well aware that the state pension age is moving later, but it doesn't state that you have to work until then. I would strongly urge people reading this to think about investing in a S&A ISA. At least they are not governed by rules enforcing minimum ages at which you can take them. I posted something along these lines below :

The maximum you could take from the pension pot tax free is 25%. If your AVCs are more than that then some would be taxed. I started late with AVCs, so am hoping they continue until I can achieve the maximum amount permitted. I also pay into a stocks and shares ISA. Pros and cons with both. The ISA route is more expensive, as you need a minimum of £50 per month, per fund, in most cases. However, in my case, section C member of the scheme, I intend to top up my monthly income with cash from the ISA tax free. for me, I consider it worthwhile. I will also have a private pension I am currently paying into. I will be leaving the NRA65 until I reach 65. I should be able to avoid tax completely until then, assuming I actually retire at 60. Hopefully

I have posted the above reply for a reason. I hope people might realise there are other ways to bridge the pension gap and cut through the mess created by poor planning and negotiating by our union over the years. They have avoided educating people about pensions, using the excuse that they cannot give advice. That is wrong. Advice is when someone tells you that one fund is better than another. THAT would be wrong. The above route would enable people to smooth things over and perhaps allow for part time work elsewhere from 60, if they need / wish to. A long winded post I know, but sometimes it is the only way to get your point across and explain something in words, people who perhaps are not as clued up, can actually understand. I hope whoever reads this will find it useful. Anyone who needs some more info can pm me.
heapsy
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[BELIAL]

Implementing a CDC scheme will also pave the way for large scale redundancies and fragmenting the business by removing the constraint of future liabilities . It is a massive gamechanger and the markets know it and have responded.

[BELIAL]

PS beware of Geeks bearing gifts