Government fires starting pistol for collective DC schemes

[RobertT]

How long do you have to be in the scheme to get the full benefits?
People saying we’re getting £280 pensionable pay? That’s 10k a year

Just to clarify:

The figures I quoted were an example based on current full time pay of £432 per week / £22,511 per year. In practice some people will have different levels of pensionable pay depending on hours worked and which pensionable allowances, if any, they get.

So based on those figures:

Each year you will build up a lump sum entitlement via the DBLSS of 3/80ths of your pensionable pay, which equals £844. That sum is guaranteed, plus there might be annual bonuses added on if the investments perform well. Once they're added, they're guaranteed too.

The actual CDC pension accrues at the rate of 1/80ths of pensionable pay, which equals £281. That is not guaranteed and can go up or down depending on investment returns, and those fluctuations can apply whether you're an employee member, a deferred member or a pensioner member.
But the aim is that it will increase each year with inflation.

After 10 years of membership you should have accrued a lump sum of £8,440 plus annual bonuses and a pension of £2,810 plus annual inflation - based on current full time pay. With the proviso that the pension could actually go down if investments don't perform adequately.
The idea is that ups and downs of the stock market will be smoothed, so the good years pay for the bad.

See the 2018 pension review booklet and the anticipated RM CDC design for more info.

[RobertT]

With this CDC scheme you are GUARANTEED NOTHING from your pension savings. "the returns from your investments may go up and down"

Yes, the benefits with CDC are targets!
Please tell us something we don't know.

[arnold cheshire]

With this CDC scheme you are GUARANTEED NOTHING from your pension savings. "the returns from your investments may go up and down"

down guaranteed ?

[heapsy]

I'd rather it didn't happen at all. As a section C member I can't help noticing that a change from RPI to CPI has crept under the radar which means we have been shafted yet again. With no guaranteed outcome for the members there is absolutely no way of working out, even roughly, what you might get. And anybody in delivery wont last until they are 67. Bag of s**t.

[BELIAL]

With this CDC scheme you are GUARANTEED NOTHING from your pension savings. "the returns from your investments may go up and down"

Yes, the benefits with CDC are targets!
Please tell us something we don't know.

Terry didn't know that this wasn't the deal of the century. I think a lot of members might have trusted his word that this pension deal would provide "a wage in retirement".
You could be correct ,but I can't quite believe that every employee of RM just gave up on having a pension.

[RobertT]

With this CDC scheme you are GUARANTEED NOTHING from your pension savings. "the returns from your investments may go up and down"

Yes, the benefits with CDC are targets!
Please tell us something we don't know.

Terry didn't know that this wasn't the deal of the century. I think a lot of members might have trusted his word that this pension deal would provide "a wage in retirement".
You could be correct ,but I can't quite believe that every employee of RM just gave up on having a pension.

It really depends on what your idea of a pension is?
And what you define as a wage in retirement?
Or maybe the question is, how many CWU members voted for the pension, and how many just saw the back pay and voted for that, when they would have got exactly the same amount of money in total had the pay rise been implemented when it should have been?

This is the timeline that's led us to CDC:

RM decided to close the DB scheme to future accrual and offered a normal DC plan in its place.
The CWU countered that with their WinRS proposal, which was a DB scheme with an NRA of state pension age.
RM then came up with the DBCBS.
Negotiations between the two parties then produced CDC.
We've currently got the DBCBS until CDC is implemented(assuming legislation).

You can argue that a normal DC scheme and the DBCBS aren't pensions at all – just glorified savings accounts!

Does a wage in retirement have to mean a guaranteed index linked income?

DC or CDC fit the bill as far as RM are concerned! Ultimately it's their decision what pension to offer. They were never going to go down the DB route because they want to know up front what the costs are going to be, and they don't want any nasty deficits to have to fund in the future.

I would say that Terry knows perfectly well that CDC is not as good as DB, but the CWU's mantra was to provide a pension scheme that provides an income rather than just a pot of money. That's what we've got.

It's not perfect but realistically we were never going to get a DB scheme.

[heapsy]

You can put your money on RM not making it work. Poor investment selection will mean the pension will not be enough. I wouldn't rely on anything RM or CWU tell us.

[Hawkey99]

Hi Robert,

You mention a sum of £4412 for a full time postman.

If someone retires before the new government scheme comes in is that the amount a person would get for each year or is some of this death benefit which will be taken off and therefore this number reduced.

Just interested as don't imagine being around when the new scheme comes in which I hear could easily be 2020-2021..

Thanks

[RobertT]

Hi Robert,

You mention a sum of £4412 for a full time postman.

If someone retires before the new government scheme comes in is that the amount a person would get for each year or is some of this death benefit which will be taken off and therefore this number reduced.

Just interested as don't imagine being around when the new scheme comes in which I hear could easily be 2020-2021..

Thanks

It's the total amount of contributions going into the proposed CDC scheme from yours and RM's contributions, based on current basic full time pay.

£432.92 per week = £22,511 per year

Total contributions = 19.6% of £22,511 = £4,412

If you've already left when CDC is implemented, then you obviously won't be paying into it, and you won't get any benefit from it.

[Hawkey99]

Hi Robert,

Its the £4421 I was wondering about.

If for instance I left after 1 year of the scheme would its value be approx £4421 or would it be less than that at part of RMs contribution is for death benefits.

I didn't make it very clear...

[RobertT]

The idea is that the CDC scheme accrues in a similar way to a DB scheme as I explained up thread.
The £4,412 is just the total contributions going in! Your chunk would be £919 net(factoring in tax relief and PSE).

So if you left after one year and based on current full time basic pay, you would have accrued a pension of £281 and a lump sum of £844.

The aim is that those benefits will increase with each year by at least inflation. But because of the nature of CDC annual increases and the actual accrued pension figures aren't guaranteed, as they can go up or down depending on how the investments perform.

For death in service values, I refer you to your 2018 pension review booklet, where it says the payment would be 4x pensionable pay.

Any decision to transfer out would require a CETV or similar. But how that figure would be worked out is not currently known as it forms part of the legislation process.

[Hawkey99]

Sorry Robert,

I must be being thick. As the CDC doesn't exist yet surely if say I wanted to leave now I would receive £4421 from the DBCBS for the last year and this would be combined with my other pension and could form part of my lump sum.

Thanks again.

[BELIAL]

With this CDC scheme you are GUARANTEED NOTHING from your pension savings. "the returns from your investments may go up and down"

Yes, the benefits with CDC are targets!
Please tell us something we don't know.

Terry didn't know that this wasn't the deal of the century. I think a lot of members might have trusted his word that this pension deal would provide "a wage in retirement".
You could be correct ,but I can't quite believe that every employee of RM just gave up on having a pension.

It really depends on what your idea of a pension is?
And what you define as a wage in retirement?

What do you think most posties consider to be a "pension " or "wage in retirement" ? Seems to me the wording implies an income of some sort ,not a possible big fat 0.
Even more sinister is the fact that this DC scheme opens the floodgates for mass redundancies by removing a massive cost liability from RM, why would any workers "representative" pave the way for that?

[RobertT]

Sorry Robert,

I must be being thick. As the CDC doesn't exist yet surely if say I wanted to leave now I would receive £4421 from the DBCBS for the last year and this would be combined with my other pension and could form part of my lump sum.

Thanks again.

Yes. The DBCBS will form part of your tax free lump sum when taking your RMPP(NRA60 & NRA65) benefits.

But the figures I used above are just as an example. In practice your pensionable pay might be higher due to any pensionable allowances you receive or lower due to the Lower Earning Deduction(section C).

* The LED will not be applied when CDC is introduced.

[RobertT]

What do you think most posties consider to be a "pension " or "wage in retirement" ? Seems to me the wording implies an income of some sort ,not a possible big fat 0.

We're just covering old ground here!
It should provide an income, but not one that's guaranteed! It should go up, it might go down. But the chances of it paying no pension at all is in theory possible, but highly unlikely.

Anybody who knows anything about equities will have either personal experience or knowledge of shares or funds that have tanked to one degree or another. If you don't just take a look at RM shares, they're currently sitting about 60% down from their highest point.

You could say that share investment is a form of gambling and they'll always be winners and losers, but all data on the subject says that equities are the best long term way to invest. Pensions are long term things and any dips and troughs should be evened out over time.
I've certainly found that out having been investing for about 20 years, and despite taking big hits during two stock market crashes, I've made good profits.

Nobody is saying CDC is foolproof, because nothing is. But it looks like it's coming our way. So get used to it!

Even more sinister is the fact that this DC scheme opens the floodgates for mass redundancies by removing a massive cost liability from RM, why would any workers "representative" pave the way for that?

I think you might find it's the opposite!

A DB scheme potentially puts liabilities onto a companies balance sheet. So if the investments don't perform adequately it's up to the company to fund the difference, (although employees might also be asked to contribute more). In simple terms, if they're using up cash to keep the pension scheme afloat, they've got less for employee wages and that could mean potential job losses.

We were told RM's contribution to keep the old DB scheme open would have to increase 3 fold from about £400 million a year to £1.2 billion.
CDC keeps RM's contribution at £400 million.

If RM were paying that extra £800 million per year, that really would be a good reason for them to reduce the workforce.