Cdc

[joe379]

Hi,
Will we be forced to join CDC? I am happy with the current scheme as it suits my needs better. Did not opt in to new scheme when I had the chance, assuming I still won’t have to join it?

[RobertT]

You don't have to join CDC, but all current RM pension arrangements will stop. So it'll be CDC or nothing.

[NWpostie]

As yet there is no start date so that we can plan for it.

[freespeech]

Hi,
Will we be forced to join CDC? I am happy with the current scheme as it suits my needs better. Did not opt in to new scheme when I had the chance, assuming I still won’t have to join it?

You won't "have" to join but why throw away the 16% (I think?) RM contribution?

[RobertT]

RM will be putting in 13.6% of pensionable pay into CDC.

Employees will be contributing 6%. But factoring in tax relief and PSE, that would effectively be just over 4%, with the taxman picking up the rest.

Whether you call it free money or deferred wages, opting out of any workplace pension is usually a very poor financial decision.

[joe379]

RM will be putting in 13.6% of pensionable pay into CDC.

Employees will be contributing 6%. But factoring in tax relief and PSE, that would effectively be just over 4%, with the taxman picking up the rest.

Whether you call it free money or deferred wages, opting out of any workplace pension is usually a very poor financial decision.

I want to keep my pension as it is, not opt out. When the cdc was first mentioned you could opt in. I chose to stay
I want to remain in the DC scheme rather than the CDC

[joe379]

Also I don’t think you can pay AVC into cdc but you can with DC scheme

[RobertT]

I want to keep my pension as it is, not opt out. When the cdc was first mentioned you could opt in. I chose to stay
I want to remain in the DC scheme rather than the CDC

Your DC savings will still be with Scottish Widows and you'll be able to manage the investments just as you can now.

Everyone with at least 5 years in the DC scheme currently has the option to join the the DBCBS instead, which you declined.
DBCBS is different to CDC!

Unless something changes, there will be no option to carry on paying into DC or the DBCBS and everyone will be put into CDC, unless they opt out. But there will be no alternative RM pension to pay into!

Also I don’t think you can pay AVC into cdc but you can with DC scheme

When CDC was first mentioned in 2018, there was a plan to be able to pay in an additional 1% of pensionable pay, which would be matched by RM.
We'll have to wait and see whether that, or any other kind of additional payments, are allowed.

You should be able to transfer out of CDC into DC if you choose. But probably not until you've become a deferred member.

[joe379]

Thanks for your help Robert, much appreciated

[silver_fox]

I have only joined the RMDCP in the last year and now that i understand it and like the way it works i want to stay in it and pay more in.
Im not sure the Cdc idea ( not clear on how it works ) is any better than the DC we currently have?
What can be more straighforward than a pot you build up with tax and NI relief plus extra from the employer?
You just have to pay money in to your own pot and watch it grow?
Cant see the problem with the current scheme. It appears to be a fair one.
Can anyone enlighten me?

[RobertT]

The first thing you need to realise is that there are currently a few different RM pension schemes on the go.

Anyone who joined before December 1971 will be in section A of the RMPP.
Between then and April 1987 will be in section B.
Between then and April 2008 will be section C.

From then on(or technically from February 2009) new starters only have the option of joining the RMDCP, and anyone with 5(I think) years in that can then join the DBCBS instead and therefore be in section F of the RMPP.

A DC pension scheme is basically just a savings account that you, RM and the government contribute to. When it comes to accessing the money you can either buy an annuity which provides an income for life, or drawdown the cash where you decide when and how much you want.
Both options have the choice of taking 25% tax free.

Sections A, B & C of the RMPP are Defined Benefit, which provides a pension based on wages and length of service. Up to 2008 that was on a final salary basis, from 2008-2018 it was average salary and the current DBCBS just provides a lump sum to take with already accrued benefits.

In 2018 RM and CWU came to an agreement on pensions via the 4 Pillars agreement. Which was to offer a pension that gives an income for life similar to a DB scheme, rather than a pot of money(DC).
That is CDC!

CDC targets a pension of 1/80th of pensionable pay for each full year of membership and that aims to go up by inflation each year. But if the investments don't do as well as hoped, it could go down.
Every member will have a proportional slice of the cake based on their own wages and length of service.

It will also give a guaranteed lump lump of 3/80ths of pensionable pay, via the DB Lump Sum Scheme, for each year of membership, with annual bonuses.

There will probably be the option of transferring out to a DC scheme.

Unless something changes, everyone will be put into CDC/DBLSS when it starts and all current schemes will stop.

For more CDC info, see the links here: viewtopic.php?f=27&t=22318

[stephen500]

The first thing you need to realise is that there are currently a few different RM pension schemes on the go.

Anyone who joined before December 1971 will be in section A of the RMPP.
Between then and April 1987 will be in section B.
Between then and April 2008 will be section C.

From then on(or technically from February 2009) new starters only have the option of joining the RMDCP, and anyone with 5(I think) years in that can then join the DBCBS instead and therefore be in section F of the RMPP.

A DC pension scheme is basically just a savings account that you, RM and the government contribute to. When it comes to accessing the money you can either buy an annuity which provides an income for life, or drawdown the cash where you decide when and how much you want.
Both options have the choice of taking 25% tax free.

Sections A, B & C of the RMPP are Defined Benefit, which provides a pension based on wages and length of service. Up to 2008 that was on a final salary basis, from 2008-2018 it was average salary and the current DBCBS just provides a lump sum to take with already accrued benefits.

In 2018 RM and CWU came to an agreement on pensions via the 4 Pillars agreement. Which was to offer a pension that gives an income for life similar to a DB scheme, rather than a pot of money(DC).
That is CDC!

CDC targets a pension of 1/80th of pensionable pay for each full year of membership and that aims to go up by inflation each year. But if the investments don't do as well as hoped, it could go down.
Every member will have a proportional slice of the cake based on their own wages and length of service.

It will also give a guaranteed lump lump of 3/80ths of pensionable pay, via the DB Lump Sum Scheme, for each year of membership, with annual bonuses.

Unless something changes, everyone will be put into CDC/DBLSS when it starts and all current schemes will stop.

People need to understand this new CDC scheme can actually see pensions go down whilst in payment.
If the pension scheme does well 1/80th and 3/80th I "think" are I think on a par with section B.
But will the garden be as rosy as the booklets we had on it paint, I don't think so.
But it has to be better than just a cash balance scheme in the long term, which once paid would see no yearly increase whatsoever.

[heapsy]

People need to understand this new CDC scheme can actually see pensions go down whilst in payment.
If the pension scheme does well 1/80th and 3/80th I "think" are I think on a par with section B.
But will the garden be as rosy as the booklets we had on it paint, I don't think so.
But it has to be better than just a cash balance scheme in the long term, which once paid would see no yearly increase whatsoever.


I do hope people understand fully the above comment. Our union rep is clueless regarding pensions. His words, not mine. Unfortunately, he is convinced that the CDC is guaranteed and wont have it any other way. The more years someone has in this scheme, and not the other DB schemes from previous years, the more unpredictable or volatile their income could be. I really would like to know what exactly would trigger a reduction in someones pension payment. I have a horrible feeling this will be used by RM to reduce liabilities by an unknown amount and for an unspecified period of time. A disaster in the making for most people I feel. I'm not sure people understand the possible implications of this.

[RobertT]

The need to inform members of how CDC works and the possibility of reductions in pensions was mentioned in the legislation.

The modelling that was done based on the CDC scheme being in place over the last century suggested there would only be a reduction on two occasions, which was during the Great Depression in the 1930's.
So if other notable stock market crashes aren't a factor, in theory it all sounds good.
But past performance is never a guide to future returns.

RM will have no liabilities as such, other than to pay an agreed percentage of pay as they would do with an individual DC scheme.
It'll be up to the scheme trustees to manage our money to ensure it meets the schemes targets. If they don't do that our pensions will reduce.

There's always the possibility RM will fall on hard times and they won't be able to afford their payments and want to reduce them. In which case the accrual rate might reduce or the scheme might close altogether.

But the whole point of CDC, is the money in the pot will be allocated to each member on a pro rata basis, according to their own pay and length of service. That will be the case whether the scheme is open and active or closed to future accrual.

The question to ask really, is CDC likely to be better than the only other alternative, which is individual DC?

A lot will come down to individual preference, but at least CDC aims to provide a pension for life rather than a pot of money with options. And how many people wouldn't understand how to manage their DC pot effectively over many years of retirement?

It's all a big unknown, but that could be said for many other things too!

[stephen500]

People need to understand this new CDC scheme can actually see pensions go down whilst in payment.
If the pension scheme does well 1/80th and 3/80th I "think" are I think on a par with section B.
But will the garden be as rosy as the booklets we had on it paint, I don't think so.
But it has to be better than just a cash balance scheme in the long term, which once paid would see no yearly increase whatsoever.


I do hope people understand fully the above comment. Our union rep is clueless regarding pensions. His words, not mine. Unfortunately, he is convinced that the CDC is guaranteed and wont have it any other way. The more years someone has in this scheme, and not the other DB schemes from previous years, the more unpredictable or volatile their income could be. I really would like to know what exactly would trigger a reduction in someones pension payment. I have a horrible feeling this will be used by RM to reduce liabilities by an unknown amount and for an unspecified period of time. A disaster in the making for most people I feel. I'm not sure people understand the possible implications of this.

The one thing that is certain in payment is the lump sum. In that once you get it (bar any errors for payment) that can't be reduced or taken back.
But what can go down is the annual pension in payment.
It may never happen.
But when all is said and done, I think an annual pension is better than a whole cash balance scheme, which once paid is done with.
Whereas I presume the annual CDC pension payments will at least rise by inflation. (without taking into account any possible reductions that we have mentioned)