opt out of CDC

Post by **rogersh** » 12 Jan 2019, 14:20

If CDC is implemented in April 2020 or 2021 i am considering opting out due to the fact that i am aged 63. (part time 20hrs)
I joined the DC scheme in 2014 & understand that scheme will cease on the introduction of CDC, which all employees will be enrolled into.

I plan to work on to the age of 67/68 so this may mean i only will be in CDC for 2-3 years so i cannot see the point.
Any thoughts.

Post by **RobertT** » 12 Jan 2019, 15:12

I plan to leave RM and retire in 2023, so don't expect to be in the CDC scheme for more than 3 years maximum.

Factoring in tax relief and PSE, the DBLSS will give me most of my 3 years of contributions back in one go and tax free at the NRA of 67, and whatever I get from the CDC scheme itself will be 'profit' for the rest of my life.

So although it won't amount to very much, I see no logical or financial reason to opt out as I'll be getting a lot more from being a member than by not paying in at all.

Going by the anticipated design of RM CDC there will also be an option to transfer out to an individual DC arrangement. Which may be more attractive?

The usual advice with pensions, is always join up to a company scheme and pay in whatever it takes to get the maximum employer contribution. Failure to do so means turning down free money! The fact it might only be for 2-3 years is irrelevant, in my opinion.

Post by **rogersh** » 12 Jan 2019, 15:56

Thanks for your insight Robert. I decided to stay with the DC scheme in the knowledge all my contributions would be in one scheme/pot I could have as one lump sum or drawdown.
My preference would have been to remain in the DC scheme. Obviously CDC will provide some kind of wage in retirement for those with several years contributions.

I suppose the fact that the higher employers contributions (13.6%) are a good reason to continue within the pension, albeit for a couple of years, Then I assume at 67 years I could take CDC/DBLSS* 3/80ths of pensionable pay) lump sum & a nominal weekly pension. Is the lump sum, or 25% of it, tax free Robert?

*DBLSS members have the option of contributing an extra 1% which company would match. (as stated 2018 pensions review booklet)

Post by **RobertT** » 12 Jan 2019, 16:12

There have been a few people on here convinced the lump sum wouldn't be tax free, but the anticipated CDC booklet seems to suggest it will be. Although obviously nothing is written in stone at the moment. Here's the important bit:

RMG would also open a Defined Benefit Lump Sum (“LS”) Section under the same Plan, to provide risk benefits (see Section 2.5 below) and a ‘tax-free cash’ lump sum as a Pension Commencement Lump Sum supported by the CDC pension. The assets of the two sections would be entirely segregated, with no facility for cross subsidy between the two.

I also intend to pay in that extra 1% into the DBLSS.

Post by **rogersh** » 12 Jan 2019, 17:00

Thanks again Robert. I think you have persuaded me to stay with the pension. I have done a calculation on what i gain & their is the advantage of PSE as you mentioned.
If i continue to work beyond 67 contributions will also continue to be added until i retire.

Post by **RobertT** » 12 Jan 2019, 18:51

Glad to be of some help.

Post by **stodgy88** » 07 Feb 2019, 16:09

hello, does been in the latest royal mail pension have any bearing on medical retirement,VR or EVR regarding any lump sum that may be due thanks

itinerant · Post by **itinerant** » 09 Feb 2019, 13:19

RobertT wrote: Going by the anticipated design of RM CDC there will also be an option to transfer out to an individual DC arrangement. Which may be more attractive?

Robert, are you saying here that those of us currently in the DC scheme will have the option to opt out of CDC and stay in DC and continue to have RM contributions being paid into it going forward? I read the notes in your link but it was not completely clear. While CDC would better for most people I suspect, I would like to remain in a DC scheme as am a fairly new RM employee planning to put in a few years only and have other pensions/investments so having the flexibility of a RM DC pot would be more advantageous for me personally.

Post by **RobertT** » 09 Feb 2019, 15:40

I can understand why a DC scheme might be better for some, but all the literature says that CDC will be a 'pension scheme for all'. That's what the CWU campaigned for and the membership voted for, albeit as one of the 4 pillars that most people probably didn't take much notice of and just voted yes because they were getting a nice slice of back pay!

What I was referring to was the planned ability to transfer out your accumulated CDC benefits into a DC scheme, rather than take them as a pension for the rest of your life. In a similar way to how members of some DB schemes can get a Cash Equivalent Transfer Value(CETV) and transfer to DC.

But as the legislation won't be forthcoming for a while yet, we don't know any exact details.