Royal Mail Defined Contribution Plan & Workplace Pensions

[POSTWOMAN]

Hello,

I had opted out of Royal Mail Defined Contribution Plan managed by ZURICH.http://www.zurich.co.uk/royalmaildcplan ... uction.htm Later I also opted out of GOVT's Workplace Pensions -https://www.gov.uk/workplace-pensions.

But now I want to rejoin Zurich (Defined Contribution Plan.) Does contacting Zurich automatically starts both pension plans - the defined contribution plan and Government's workplace pension or do I need to contact Department of Work & Pensions separately to rejoin GOVT's Workplace Pensions ?

[RobertT]

Under the governments workplace pension reforms the Royal Mail now have to offer all their employees a pension which meets a certain standard in terms of contributions, etc. It's RM that run the scheme not the government, so the only scheme you can join is the Zurich one.

More info including how to opt in can be found by downloading the plan guide here:
http://www.zurich.co.uk/royalmaildcplan ... y/test.htm" onclick="window.open(this.href);return false;

[stodgy88]

hello, what % do royal mail pay into the DC PENSION PLAN -thanks.

[RobertT]

hello, what % do royal mail pay into the DC PENSION PLAN -thanks.

It can vary from 1% to 7%. Download the 'plan guide' from the link above and it will give you more info.

[stodgy88]

thanks.

[oralrural]

I pay £18 less £3 tax relief,RM pay in £25 total £42.
Drawing all my pensions.
This one is with Zurich, so all info is from them,don't get any post from RM.
Only a couple of years left for me so i thought why not you can't get interest rates better than this all for £15 a week nearly £1,200 a year for nothing.
Still say draw ALL your pensions when you can,way things are going.

[POSTWOMAN]

Under the governments workplace pension reforms the Royal Mail now have to offer all their employees a pension which meets a certain standard in terms of contributions, etc. It's RM that run the scheme not the government, so the only scheme you can join is the Zurich one.

More info including how to opt in can be found by downloading the plan guide here:
http://www.zurich.co.uk/royalmaildcplan ... y/test.htm" onclick="window.open(this.href);return false;

Thanks a lot

[monkeycat]

Anyone know if you can be in section C and join the defined contribution plan?

[RobertT]

Anyone know if you can be in section C and join the defined contribution plan?

You can't pay into both at the same time but I think you can pay into the DC plan if you have a deferred Section A/B/C pension or if you have a pension already in payment. I would have to to check on that!

Section C members can pay AVC's via Bonusplan which benefits from extra money from RM but is only about £100 per year for a full timer. Flexiplan is also an option but gets no RM contribution.

There's nothing stopping you from opening a personal/stakeholder pension or an ISA aswell as your company pension, although you obviously don't get any employer contributions.

[toomuchcoke]

There's nothing stopping you from opening a personal/stakeholder pension or an ISA aswell as your company pension, although you obviously don't get any employer contributions.

Though some would argue that, unless you feel you're likely to need the bankruptcy protection of a pension (i.e. your creditors won't be able to get their mitts on the money inside it), you'd be better served by keeping the money well away from the pension straitjacket (Currently you can get 25% of the capital in a pension pot out anytime after you reach 55[1], and then either buy an annuity with the remainder or go into drawdown (or if you have enough other guaranteed sources of income, flexible drawdown). This assumes that future governments won't change the rules even further.[2]) Sticking the money into either a Stocks & Shares ISA or maybe just directly into equities would enable you to access to the capital if needed at a future date.

Nb: Nothing in this post should be construed as financial advice ...

[1] It's commonly referred to as a "tax free lump sum" but the legalese was changed a while back to "pension commencement lump sum", which to my mind sounds like preparing the ground for making it not tax-free at some future date. YMMV.
[2] And if you believe that then I may have some nice "beach front" property in the Southern Kalahari you could be interested in?

[RobertT]

There are pros and cons with pensions, just as there’s pro and cons to ISA’s.
The pension may benefit from employer contributions and tax relief and in time gives you a regular income stream for the rest of your life, while the ISA / investments give you flexibility to do what you want with your money when you want to, but the burden of funding them is usually solely down to you.
Infact most IFA’s will probably suggest that a combination of both is best!

[toomuchcoke]

The pension may benefit from employer contributions and tax relief

The employer contributions are pretty much the only reason to go with a pension. Meanwhile the tax relief is basically a red herring! Excluding the tax-free lump sum, unless your income tax rate is different during retirement than it was during your working life then any tax relief you get on the money on the way in is recouped by the government on the way out.

[RobertT]

The employer contributions are pretty much the only reason to go with a pension. Meanwhile the tax relief is basically a red herring! Excluding the tax-free lump sum, unless your income tax rate is different during retirement than it was during your working life then any tax relief you get on the money on the way in is recouped by the government on the way out.

You’re forgetting the Personal Tax Allowance which applies to pension income in the same way as earned income.
So if your pension and any other retirement income is likely to pay less than the PTA then you will pay no tax at all!
Tax relief is not a red herring at all, it’s valuable ‘free money’ that is on offer to help fund your retirement.
Infact a lot of people actively try to fund their pensions to keep them under the PTA limit, with any excess savings going into ISA’s, etc.

[toomuchcoke]

The employer contributions are pretty much the only reason to go with a pension. Meanwhile the tax relief is basically a red herring! Excluding the tax-free lump sum, unless your income tax rate is different during retirement than it was during your working life then any tax relief you get on the money on the way in is recouped by the government on the way out.

You’re forgetting the Personal Tax Allowance which applies to pension income in the same way as earned income.
So if your pension and any other retirement income is likely to pay less than the PTA then you will pay no tax at all!

Correct me if I'm wrong but isn't that covered by where I said "unless your income tax rate is different during retirement"? Also, under the current government plans the state pension is going to use up about 75% of the tax free allowance. So unless you're expecting a truly minimal pension the tax free allowance isn't going to have much effect either.

Tax relief is not a red herring at all, it’s valuable ‘free money’ that is on offer to help fund your retirement.

Taking a very simplistic model, you pay £80 into your pension, tax relief takes it up to £100. When that £100 comes back out of the pension "wrapper" income tax is deducted at 20% and you get £80. Please explain how valuable this "free money" was? And it doesn't matter how many years of whatever growth you assume happens in between the money going in and the money coming out, the tax relief and deduction still cancels out giving you the same amount as if you'd not used a pension.

[RobertT]

Correct me if I'm wrong but isn't that covered by where I said "unless your income tax rate is different during retirement"?

I took that to assume going from a 40% tax payer in work to a 20% one in retirement but the personal tax allowance will obviously still apply regardless of your tax band.

Also, under the current government plans the state pension is going to use up about 75% of the tax free allowance. So unless you're expecting a truly minimal pension the tax free allowance isn't going to have much effect either.

The whole point of a pension is that it’s income, so tax will always potentially apply. I don’t really see the difference between state and personal provision!
Also, what about retiring before state pension age? If you pack up work at 60 for example with a pension of £10k which is equal to the personal tax allowance from April 2014, you will pay no tax until you do receive your state pension. Based on recent government proposals, that could mean 8 years or more of tax free income for some people.

Taking a very simplistic model, you pay £80 into your pension, tax relief takes it up to £100. When that £100 comes back out of the pension "wrapper" income tax is deducted at 20% and you get £80.

It all depends on what your total annual income is! If it’s lower than the personal tax allowance, then you pay no tax!

Please explain how valuable this "free money" was? And it doesn't matter how many years of whatever growth you assume happens in between the money going in and the money coming out, the tax relief and deduction still cancels out giving you the same amount as if you'd not used a pension.

I’m sorry but it does matter about growth. If you put in £80 and get £20 tax relief, if that doubles for example over time, then you take out £200 with tax only being payable on anything over the yearly allowance.

Plus you surely have to take into account any employer contributions in that argument? So for example, you pay in £80, tax relief takes it up to £100, employer matches it, and you’ve got a £200 contribution that’s only costing you £80. If again it doubles over time you have £400 potentially tax free and it’s only cost you £80. Even if you do pay tax on all of it, then you still get £320.

And you’ve got the option of a tax free lump sum.

I appreciate pensions aren’t for everyone and relying solely on them for all your retirement needs is in my opinion, a mistake. But their aim is to provide a regular monthly income for life! Sure, there might be tax to pay but millions of people pay tax on their wages but that doesn’t stop them getting a job!

ISA’s and other similar investments have also got their place and I have them myself, and they form part of my retirement planning. You don’t pay tax on ISA’s when you withdraw your money, but you will have already paid tax on that money before you invested it in the first place. So it’s swings and roundabouts really.