RMPP C for 12 years only 10 years to go

[eastie]

Retire in 10 years and as the plan finishes in 2 years is it worth me joining the new plan for just 8 years or make other arrangements?

[TrueBlueTerrier]

As the terms of the new pension haven't been formalised yet I guess its a case of make your mind up when they
do. However, don't forget at least with the Company pension, whatever it is, RM have to pay some contributions, they don't with any private ones.

[RobertT]

Retire in 10 years and as the plan finishes in 2 years is it worth me joining the new plan for just 8 years or make other arrangements?

The RMPP is expected to close on 31st March 2018 so only 1 year 3.5 months time!

The new arrangement will be the RM Defined Contribution Plan which means you’ll just build up a pot of money which you can do a number of different things with.
If you don’t know the different options that you’ve got with a DC pension pot, this will give you a good idea: https://www.moneyadviceservice.org.uk/e ... on-schemes" onclick="window.open(this.href);return false;

The RMDCP benefits from employer contributions, tax relief and PSE which makes it a very cost effective way to save. Full details here: https://www.zurich.co.uk/internet/works ... 716529.pdf" onclick="window.open(this.href);return false;

I’m in Section C of the RMPP aswell and assuming a continued 6% employee contribution, I expect my weekly contributions to increase in the RMDCP to allow for the expected abolition of the £3,328 Lower Earnings Deduction, to approximately £25 per week. But factoring in tax relief and PSE that will effectively only cost me £17.

If for arguments sake, the RM contributions stay at the current highest in the RMDCP of 9%, that would mean there’s around £62 per week going in and it’s only costing me £17. Over 8 years that’s a total of about £25,800 with a net outlay of only £7,070, plus investment returns. Where else can you get an uprating of your money like that?
If the RM agree to pay a higher percentage, then the benefits are greater.

If you don’t join up you’d be giving up all that free money off RM and also won’t be able to take part in PSE which is a nice little extra saving that the government allows us to make.

In short, you’d be mad not to join up.

[nataddick]

I agree with Robert's very comprehensive reply. It really is a no brainer to contribute to a pension scheme where an employer makes a contribution as well, especially when it exceeds the member's own contribution.

RM will probably want the replacement scheme to mirror the existing RMDCP but let's hope that the CWU - almost silent on the issue of any current negotiations - will secure improvements to a) employer contribution rates based on full pensionable pay and b) to the death in service benefit multiplier, so that the 'new' version of the Plan is actually better than the existing one. The existing RMPP is extremely unlikely to be available post April 2018 but we live in hope that there are some favourable transitional arrangements for those within 10 years of retirement !

With a Flexible Retirement Age now legally in force, it is highly probable that quite a few scheme members will elect to work beyond 65, either on a full or part-time basis and this presents a whole host of flexible retirement options thereafter. One of these could be to continue contributing to the RMDCP which would serve to enhance the return from the Plan to members.

Whatever the new scheme offers it will be vastly inferior to the existing RMPP. Most full time members will currently be accruing an annual pension in the region of £300 for each year of service. So with 8 years potential service to NRA 65 and ignoring inflation proofed increases, you would expect an overall pension increase of around £2,400 p.a. Using Robert's numbers after 8 years, a pot might be worth say, £25,800. Convert this to an annuity (at today's rates) with inflation increases, a spouses pensions of 50% and guaranteed 5 years (similar basis to RMPP) and the pension income would be below £1000 p.a. Individual outcomes will of course vary.

[RobertT]

I believe there are instances where other companies have provided a two-tier DC pension arrangement for their workers when their defined benefit schemes have closed, with the ‘displaced’ DB members getting a higher percentage employer contribution. Personally I would obviously want as higher a percentage as possible with the current 17.1% being the ideal. But I also understand the CWU’s wish to get a better deal for current RMDCP members and I don’t think we can have both. So a maximum 10% - 12% RM contribution for all is probably the most likely outcome. Although I would also like to see another tier of optional employee contributions introduced which also attracts more off RM.

The RMDCP currently has an opt-in age limit of 74, and I expect that to continue past April 2018.

I must add that although I have ‘bigged up’ the virtues of joining the RMDCP, I in no way approve of the closure of the RMPP. The figures I used sound quite healthy but £25k in pension terms is nothing really, as nataddick has illustrated. It’s not much more than a years’ basic pay, therefore it’s obviously not going to get you very far in your retirement which can last for 20-30 years or more. But everything you can get towards it will help, so joining any workplace based pension where your employer contributes should be a very easy decision to make.

[nataddick]

I think most readers of the pensions forum are now really interested in the proposed closure of RMPP and what the replacement scheme is likely to provide when compared to the existing one. None of us know for sure, so can only make an informed decision that it should be no less favourable than the current RMDCP.

It is therefore vital that when the Company's New Proposal is eventually unveiled, that the CWU commit RM to provide realistic comparisons for RMPP members on the current v new schemes, so the extent of the 'hit' can be assessed.

Only then, will members begin to realise that while the replacement scheme will be a very poor substitute for the existing one, it will nevertheless provide an opportunity to invest in a pension plan that offers significant benefits when compared to alternative forms of investment.

None of us want the RMPP to close as it will disadvantage every single member, with the youngest hit the hardest.

Robert, in the absence of recent CWU communications (save for the odd unofficial post from Dingo - who mentions a possible announcement in January 2017) I think it is vital that those of us that want to help and inform our work colleagues should continue do so. Who else gives a toss ?

[RobertT]

Yes there does seem to be an increased level of interest on these forums, and I agree that RM should provide detailed comparisons of how people will be affected. They did do a similar thing in 2013 when the last changes were made, and hopefully that will happen again.

I still find the general lack of knowledge and information that many posties have about their own pensions and futures, hard to understand. I’ve seen some throw their statements in the bin, sneer at me because ‘pensions are for old people’ which is totally missing the point, and generally expect their retirement income to just materialise out of thin air at some point in the future. All of which you can perhaps understand from someone in their 20’s but I know people in their 40’s and 50’s who this applies to!

I don’t agree with everything Dingo says in his posts but I do value his contributions and insights into what’s going on. In fact his comments in another thread about many posties being more interested in getting another 0.2% rise in wages than losing out to the tune of £000’s from their pensions is sadly quite true.

I personally can’t imagine the new terms would be worse than the current RMDCP, but they will certainly be a lot less generous than the current RMPP.

DC Pensions are excellent ways to save money although not necessarily for providing an income for life, due to the poor annuity rates currently on offer! But with the flexibilities of DC schemes, they offer different choices that many people still don’t understand. And thinking ahead, what worries me is those flexibilities will also persuade many to dip into their pensions when they really shouldn’t.

We’ve already seen on these forums that some posties seem determined to take their RMPP at 55 whether it’s a good financial decision or not, and I believe many will live to regret their decisions. But at least they will still have an income coming in, albeit on a reduced basis. But the danger with DC pensions is that many people will take their pot, probably paying unnecessary tax, have a spending spree and leave themselves with absolutely nothing other than their state pension provision. So continued education is definitely needed.

I find the lack of communication from the CWU quite staggering, although I’m also aware they may not be able to divulge too much due to talks being ongoing. I appreciate there are costs involved with mailing 80,000 members(or whatever the number is). But they have a website, a presence on social media and the use of these forums which has over 70,000 members. Surely they’re capable of giving us more information than they have so far?

I expect the procedure for closure of the RMPP to mirror the same process for the Post Office pension, so an announcement fairly early in 2017 is probably about right.

[emilyjay29]

Some great posts on here Gentleman. Everything is spot on

[emilyjay29]

Some great posts on here Gentleman. Everything is spot on

[westham000]

Just a quick question. I will try to keep simple and too the point. The lump sum that I was due to receive from my pension when I hit 65. When the scheme is closed , what will happen to this lump sum? A) will I be allowed to covert it into additional pension. For example buy added years . B) will the lump sum be rolled over into the other inferior pension scheme. Or C) will the lump sum be lost? I will appreciate any feed back , especially from Robert T.

[RobertT]

Just a quick question. I will try to keep simple and too the point. The lump sum that I was due to receive from my pension when I hit 65. When the scheme is closed , what will happen to this lump sum? A) will I be allowed to covert it into additional pension. For example buy added years . B) will the lump sum be rolled over into the other inferior pension scheme. Or C) will the lump sum be lost? I will appreciate any feed back , especially from Robert T.

If you are a Section A/B member you get a lump sum as standard although you can opt to convert that to more pension if you want to.
If you’re a Section C member you don’t get a lump sum as standard but can convert some of your pension to get one.

The fact that the RMPP is expected to close won’t change anything other than your benefits will be based on just 8 years of NRA65 service(2010-2018). So assuming you’re going to hit 65 after 31st March 2018, expect a lower pension and lump sum to what is quoted as ‘estimated benefits at 65’ on your statement.

[toomuchcoke]

Using Robert's numbers after 8 years, a pot might be worth say, £25,800. Convert this to an annuity (at today's rates) with inflation increases, a spouses pensions of 50% and guaranteed 5 years (similar basis to RMPP) and the pension income would be below £1000 p.a. Individual outcomes will of course vary.

That does ignore the possibility of any investment returns over those 8 years ... (Granted who knows what might happen over the next 8 years, but if investment returns = 0% then no defined benefit pension is going to be looking health either!) The defined contribution scheme I have from a previous employer has almost trebled in value over the last 8 years, and I've barely paid anything into it over that time period.

[nataddick]

Robert, as is often the case I concur !

Both CWU and Unite appear to be failing in their duty to protect RMPP member's interests at the present time but we live in hope that they are close to negotiating a favourable outcome, given the limited range of options available. They must be bound by some form of confidentiality agreement, as there is no other explanation for the lack of communication from either organisation, given the very public announcement to close the RMPP from April 2018

[westham000]

Thanks for your reply Robert T. I am in section c pension scheme and will be 57 in 2018 with 8 years in the scheme when it closes. Was forecast to have approximately £30000 max lump sum at 65. Assuming the scheme closes in 2018, and let's say my lump sum forecast is £15000 will I be able/allowed to covert this to added years , so when or if I reach 65 instead of having 8 years in the pension scheme I would have, and this is only a guess , I would maybe able to buy another 4 years, or would this £15000 be put into the new inferior pension scheme , or would this money be lost? Thanks again for your help.

[RobertT]

Thanks for your reply Robert T. I am in section c pension scheme and will be 57 in 2018 with 8 years in the scheme when it closes. Was forecast to have approximately £30000 max lump sum at 65. Assuming the scheme closes in 2018, and let's say my lump sum forecast is £15000 will I be able/allowed to covert this to added years , so when or if I reach 65 instead of having 8 years in the pension scheme I would have, and this is only a guess , I would maybe able to buy another 4 years, or would this £15000 be put into the new inferior pension scheme , or would this money be lost? Thanks again for your help.

You seem to want to use your lump sum entitlement twice!

As I said in my previous post, Section C members don’t get a lump sum as standard but have the option of commuting some of their annual pension to get one. If you don’t want to take a lump sum or you want to take a smaller lump sum than the maximum allowed, you just get more pension income instead. It’s covered on page 2 of your annual statement!

So it’s not possible to buy extra years with your lump sum as such, you just don’t take the lump sum, hence you get a bigger pension.

My Section C pension currently increases at the rate of about £300 per year(I assume yours will be similar), so by 2018 I will have around £2,400 of NRA65 pension in total(8 years). When I reach 65 I will have the option of taking all of that as annual pension; or having a smaller pension plus a lump sum.
If I were to take the maximum lump sum available I estimate that would be about £12,000 and the annual pension would be reduced to about £1,800.

*I haven’t factored in any increases for inflation into those figures. Also if I take it before 65 those values would be reduced by 5% for every year I take it early.

No lump sums from your RMPP will be going into the ‘new’ RMDCP and they won’t be lost either because:
a) Taking a lump sum is just an option.
b) The RMPP & RMDCP are two standalone schemes with totally different rules. In effect you will have a NRA60 pension which relates to service up to 2010, and a NRA65 pension from 2010 to 2018(assuming closure), both of these have similar options as I’ve detailed above but at different ages. Plus then a DC pension pot from 2018 onwards which is not connected to the other two in any way.

I hope that helps.