Pension Entitlement age 55 & EVR options with the new MTSF deal

[thewayforward]

I am 55 years old with 32 years service as an OPG.39 hr contract.If Voluntary redundancies are offered to over 55's in the next 2-3 years is it more beneficial to take my RMP 60 pot pension now actuarially reduced i know in the hope that i may get 104 weeks redundancy payment ie £42000 approx.Or is it better to keep my pension running whilst still working full time and get an enhanced pension and 26 weeks redundancy? Which would be the best option financially? What does an enhanced pension mean? Would it mean say £5000 on the lump sum and say £1000 a year on the annual pension salary as a guess? Any help with this would be greatly appreciated.

[RobertT]

I am 55 years old with 32 years service as an OPG.39 hr contract.If Voluntary redundancies are offered to over 55's in the next 2-3 years is it more beneficial to take my RMP 60 pot pension now actuarially reduced i know in the hope that i may get 104 weeks redundancy payment ie £42000 approx.

These things are always an individual thing, but the general rule is don’t take any salary based pension before the correct date – the actuarial reduction will be with you for life!

Or is it better to keep my pension running whilst still working full time and get an enhanced pension and 26 weeks redundancy?

If you have no genuine need for your pension, then there’s no point in taking it. If EVR/VR becomes an option at some point, you can stop paying into your pension then and get 104 weeks redundancy payment, if that’s the better choice for you.

Which would be the best option financially?

How long is a piece of string?
Again it’s a personal thing to some extent, but as a rule I would say the younger you are, the better off you’ll be by taking the enhanced pension, assuming you have that option*.

What does an enhanced pension mean? Would it mean say £5000 on the lump sum and say £1000 a year on the annual pension salary as a guess? Any help with this would be greatly appreciated.

Unless it’s changed since the new MTSF agreement was made, then you’ll get 37.5% of the pension you would have got if you carried on working until 65. In practice, the younger you take it the more beneficial it’s likely to be. So a 55 year old would probably be better off over time by taking the enhanced pension, while a 64 year old wouldn’t really gain much from an enhanced pension and would be better off with the bigger pay off.


*Please bear in mind that the terms of MTSF were changed last year so that an enhanced pension would only be offered if the total cost to the business was the equivalent of 104 weeks pay or less. I don’t think it’s dead in the water as some people seem to think but in practice it means the younger you are, the more it’s likely to cost, and so the less likely you are to get it.

Also, the RMPP as we know it will probably close to future accruals in 2018, and that may also mean the end of enhanced pensions as we know them too.

[Tman]

Unless it’s changed since the new MTSF agreement was made, then you’ll get 37.5% of the pension you would have got if you carried on working until 65.

Unless you've worded it poorly, this is incorrect. It should read that you'll get your remaining years until the normal retirement date will be enhanced by 37.5% and added to your service.
For example, if someone had ten years in the job and twenty years still to work, the years (for the purposes of working out the MTSF payments) would be enhanced by 37.5% ie about seven years in this instance, so the potential MTSF payment would be calculated on a roughly seventeen (10+7) years entitlement.

[RobertT]

Unless it’s changed since the new MTSF agreement was made, then you’ll get 37.5% of the pension you would have got if you carried on working until 65.

Unless you've worded it poorly, this is incorrect. It should read that you'll get your remaining years until the normal retirement date will be enhanced by 37.5% and added to your service.
For example, if someone had ten years in the job and twenty years still to work, the years (for the purposes of working out the MTSF payments) would be enhanced by 37.5% ie about seven years in this instance, so the potential MTSF payment would be calculated on a roughly seventeen (10+7) years entitlement.

You’re right about me not wording it correctly. Although I think I can probably say the same about you too!

What would actually happen is that any years you’ve accrued until EVR date would be paid in full and then you would get 37.5% of your remaining potential service up to 65.

So someone theoretically taking an enhanced pension on their 55th birthday would effectively have another 3 years and 9 months added on.

[Tman]

As I said then..

[RobertT]

Well actually if you read your first sentence back, you seem to be saying that under EVR you will get your remaining years up to 65 plus they will then be enhanced by 37.5%.
While your second sentence describes what would actually happen.

But we got there in the end.

[stroller]

You need to read the new MTSF agreement that took effect from October 1st 2015, the enhanced pension has now been taken away

[RobertT]

You need to read the new MTSF agreement that took effect from October 1st 2015, the enhanced pension has now been taken away

The important bit of the new MTSF agreement is here:

Voluntary Redundancy Cap

It has not been possible to persuade the business to further extend the suspension of the cap. With effect from 1st October this year the suspension will be lifted. This does not affect redundancy terms based on the multiplier but will limit the ability of members of the Royal Mail Pension Plan (RMPP) to receive immediate payment of enhanced pension to circumstances in which the total cost to the business does not exceed the equivalent of two year’s pensionable pay.

Where the combined redundancy and pension cost would exceed the equivalent of two years pensionable pay, cash compensation of 104 weeks pensionable pay will be offered instead.

If a redundancy exercise is already in progress and some employees have a last day of service before 1st October and some after, the current terms will apply throughout.

It clearly says that the monetary limit for the business to offer an enhanced pension is 104 weeks pay. Therefore if it costs the business less than that, it is will still be an option for some.

[stroller]

RobertT

What I should have said was people like me and the person who started the topic, who is 55 with 32 years service, won't get an enhanced pension as I would go over the cap

[teesdale]

Worst thing to happen for the CWU last year removing that cap. That paragraph of explanation is badly worded on purpose. Most reps and members know nothing about it, even though it may have lead to them losing out on tens of thousands of pounds in EVR.

[thewayforward]

Thankyou for all your contributions,this may be a thread that will enlighten other staff to what is going on in this curious company.Just to be clear though ..if i was offered lets say redundancy at 57 with 34 years service,i would receive 104 weeks pay and no pension adjustment or enhancement.Would I be able to delay taking both pension pots until i was actually 60 ? or would i be compelled to receive immediate payment of my pension but actuarilly reduced by 3 years ie 15%? Hope i am following this correctly

[Tman]

Worst thing to happen for the CWU last year removing that cap. That paragraph of explanation is badly worded on purpose. Most reps and members know nothing about it, even though it may have lead to them losing out on tens of thousands of pounds in EVR.

They won't "lose out on tens of thousands" because they never had it in the first place. It's not the "worst thing" for the CWU either, as they fought long and hard for the cap to stay removed, as the relevant LTB explained.
Who'd be a union official....

[RobertT]

Thankyou for all your contributions,this may be a thread that will enlighten other staff to what is going on in this curious company.Just to be clear though ..if i was offered lets say redundancy at 57 with 34 years service,i would receive 104 weeks pay and no pension adjustment or enhancement.

The maximum cost to the business of EVR must be no more than 104 weeks pay. At your age it would probably cost more than that, so VR would only be offered at the rate of 104 weeks pay. There would be no enhanced pension.

Would I be able to delay taking both pension pots until i was actually 60 ? or would i be compelled to receive immediate payment of my pension but actuarilly reduced by 3 years ie 15%? Hope i am following this correctly

If you are given VR you will have the same choices with your pension as if you were just handing in your notice. So you could take all of your pension, just the NRA60 part or defer all of it until a later date.
It would be reduced by 5% for each year you take it before normal retirement age. So if you were to take both parts at 57, your NRA60 would be reduced by 15% and your NRA65 by 40%.