RMPP v Cash balance DB transition scheme

[stephen500]

I have done some thinking and pouring over RM proposals to move me to a transitional scheme.
My thoughts.
Currently, on my current pensionable pay, I gain approx £300 per year to my pension and around £1000 lump sum.
Rm for the DB cash scheme (temp) are planning to pay me 19.6% of pensionable pay as a lump sum.
That's around nearly £5000 per year on my current pensionable pay.
So in other words I gain each year around £3700?
So over say three years, the current RMPP would have given me £3K lump sum and around £900 on my pension.
Whereas now, it would be £15000 lump sum.
If I lived 20 years after retirement, RMPP would pay me £18000 in extra pension and £3K lump sum. Total £21000
Transitional scheme £15000
If I live 15 years..RMPP £13,500 plus £3000 lump sum = £16500
So I seem to lose out, once I reach about 14 years after taking my pension. This assumes temp scheme lasts 3 years. Although I don't see scheme changing part way through a financial year. So I am guessing change to cdc would not be till Apr 20 at the earliest. If it happens at all. Good chance I will see 3 years out in temp scheme. I may not go into new cdc if I have a year left.

[RobertT]

The existing RMPP is closing to future accrual on 31st March so you will no longer build up any more benefits from then on. So what you would have got if the scheme stayed open is irrelevant!

From 1st April you will be building up a ‘cash balance’ via the transitional scheme, which is there to help fund the tax free lump sum when you take your RMPP benefits. How long it lasts, only time will tell!

Everyone will be losing out with the Cash Balance scheme as far as their ongoing pension is concerned, because all it’s doing is providing a lump sum!

Although as most people take the maximum lump sum, it means they’ll be giving up less pension to get it.

[vmaxv4]

The existing RMPP is closing to future accrual on 31st March so you will no longer build up any more benefits from then on. So what you would have got if the scheme stayed open is irrelevant!

From 1st April you will be building up a ‘cash balance’ via the transitional scheme, which is there to help fund the tax free lump sum when you take your RMPP benefits. How long it lasts, only time will tell!

Everyone will be losing out with the Cash Balance scheme as far as their ongoing pension is concerned, because all it’s doing is providing a lump sum!

Although as most people take the maximum lump sum, it means they’ll be giving up less pension to get it.

Struggling with transition arrangements.
But you have summed it up nicely.
Cheers Rt

[vmaxv4]

Everyone will be losing out with the Cash Balance scheme as far as their ongoing pension is concerned, because all it’s doing is providing a lump sum!
.

As far as the transition period goes, what Pension provisions are available with the lump sum accrued?

[RobertT]

Everyone will be losing out with the Cash Balance scheme as far as their ongoing pension is concerned, because all it’s doing is providing a lump sum!
.

As far as the transition period goes, what Pension provisions are available with the lump sum accrued?

Most current employee members of the RMPP are in section C which doesn’t provide a lump sum as standard when taking their pensions. But they do have the option to give up some pension to get one. And a majority choose to take the maximum 25% tax free lump sum!

The aim of the transitional Cash Balance scheme is that both ours and RM’s contributions go towards funding that lump sum, so we don’t have to give up as much or possibly any of our pension to get it.

There is no ability to buy more pension with the lump sum, but it means we will keep more of the pension we’ve already accrued.

[cloherty1976]

Everyone will be losing out with the Cash Balance scheme as far as their ongoing pension is concerned, because all it’s doing is providing a lump sum!
.

As far as the transition period goes, what Pension provisions are available with the lump sum accrued?

Most current employee members of the RMPP are in section C which doesn’t provide a lump sum as standard when taking their pensions. But they do have the option to give up some pension to get one. And a majority choose to take the maximum 25% tax free lump sum!

The aim of the transitional Cash Balance scheme is that both ours and RM’s contributions go towards funding that lump sum, so we don’t have to give up as much or possibly any of our pension to get it.

There is no ability to buy more pension with the lump sum, but it means we will keep more of the pension we’ve already accrued.

Couldn't they make some sort of tax arrangement if you did not take your lump sum that you saved on tax.
Say your pension was £10000 a year the first £2500 was non taxable.
People paying 20% tax would be £500 a year better off.

[vmaxv4]

Everyone will be losing out with the Cash Balance scheme as far as their ongoing pension is concerned, because all it’s doing is providing a lump sum!
.

As far as the transition period goes, what Pension provisions are available with the lump sum accrued?

Most current employee members of the RMPP are in section C which doesn’t provide a lump sum as standard when taking their pensions. But they do have the option to give up some pension to get one. And a majority choose to take the maximum 25% tax free lump sum!

The aim of the transitional Cash Balance scheme is that both ours and RM’s contributions go towards funding that lump sum, so we don’t have to give up as much or possibly any of our pension to get it.

There is no ability to buy more pension with the lump sum, but it means we will keep more of the pension we’ve already accrued.

I’m a section B member. Can i convert all/ some of the cash balance lump sum into any form of a monthly pension?

[RobertT]

I’m a section B member. Can i convert all/ some of the cash balance lump sum into any form of a monthly pension?

As a section B member you do get a lump sum as standard and you can convert some of that to get a bigger pension. Details in the plan guide.
But as far as i know you won't be able to convert any of the cash balance.

[vmaxv4]

I’m a section B member. Can i convert all/ some of the cash balance lump sum into any form of a monthly pension?

As a section B member you do get a lump sum as standard and you can convert some of that to get a bigger pension. Details in the plan guide.

Yes I’m up to speed with that, just received my annual “Provisional Estimate Of Pension Benefits “ statement.
As I thought,
They “RM” can’t/won’t want this transition period to be too prolonged or everyone’s monthly pensions will diminish?
What are your thoughts?

[stephen500]

I’m a section B member. Can i convert all/ some of the cash balance lump sum into any form of a monthly pension?

As a section B member you do get a lump sum as standard and you can convert some of that to get a bigger pension. Details in the plan guide.

Yes I’m up to speed with that, just received my annual “Provisional Estimate Of Pension Benefits “ statement.
As I thought,
They “RM” can’t/won’t want this transition period to be too prolonged or everyone’s monthly pensions will diminish?
What are your thoughts?

Over a long period of time, years and years. If this DB cash balance was to become the norm, then the pension element would not become less, but would only grow by inflation. The lump sum would get greater. If that benefited me or you depends on how long we live after retirement.
I tried to work out the point where I became worse off for my transitional element and I think it is about 14 years after retirement.
But only worse off for the part of my pension that has been in the transitional scheme, for me that is 3 years.
The longer you would be in the scheme, the greater you have to lose in retirement (at that break point)
Ie My RMPP pension increases currently at around £300 per year along with a lump sum of about £1000.
Over 3 years that would have been £900 on my pension for life and £3000 on the lump.
So after retirement if I lived 15 years I would have had £16,500 from RMPP (from these 3 years)
Now under transitional I would receive around £15000.
My normal RMPP pension would continue to up rate by inflation.
If the transitional scheme were to become set in stone, our actual pension would not increase except for inflation (as it will not do anyway as the scheme is closing)
But as said our lump sum would continue getting larger.
That's my reading of it.

[vmaxv4]

I’m a section B member. Can i convert all/ some of the cash balance lump sum into any form of a monthly pension?

As a section B member you do get a lump sum as standard and you can convert some of that to get a bigger pension. Details in the plan guide.

Yes I’m up to speed with that, just received my annual “Provisional Estimate Of Pension Benefits “ statement.
As I thought,
They “RM” can’t/won’t want this transition period to be too prolonged or everyone’s monthly pensions will diminish?
What are your thoughts?

Over a long period of time, years and years. If this DB cash balance was to become the norm, then the pension element would not become less, but would only grow by inflation. The lump sum would get greater. If that benefited me or you depends on how long we live after retirement.
I tried to work out the point where I became worse off for my transitional element and I think it is about 14 years after retirement.
But only worse off for the part of my pension that has been in the transitional scheme, for me that is 3 years.
The longer you would be in the scheme, the greater you have to lose in retirement (at that break point)
Ie My RMPP pension increases currently at around £300 per year along with a lump sum of about £1000.
Over 3 years that would have been £900 on my pension for life and £3000 on the lump.
So after retirement if I lived 15 years I would have had £16,500 from RMPP (from these 3 years)
Now under transitional I would receive around £15000.
My normal RMPP pension would continue to up rate by inflation.
If the transitional scheme were to become set in stone, our actual pension would not increase except for inflation (as it will not do anyway as the scheme is closing)
But as said our lump sum would continue getting larger.
That's my reading of it.

Cheers