CDC legislation update

[RobertT]

RM gets credit for pushing through the CDC pension: https://www.express.co.uk/finance/perso ... ns-popular" onclick="window.open(this.href);return false;

I already linked to that article!

https://www.royalmailchat.co.uk/communi ... 27&t=96942" onclick="window.open(this.href);return false;

[RobertT]

Legislation update:

The Pensions Bill is due to have it's second reading in the House of Commons on Wednesday 7th October.

https://services.parliament.uk/bills/20 ... hemes.html" onclick="window.open(this.href);return false;

[NWpostie]

If passed we may be looking at an implementation date begining of the tax year April 2021.

A few more months to pay into my Flexiplan and Bonusplan, I would imagine as you said payment will cease as you can't see how we can be a member of CDC and AVC at the same time, I would presume it will stop automatically.

[RobertT]

If passed we may be looking at an implementation date begining of the tax year April 2021.

We may be, but personally I think that's the earliest it'll be implemented. The second half of 2021 now seems more likely to me.

A few more months to pay into my Flexiplan and Bonusplan, I would imagine as you said payment will cease as you can't see how we can be a member of CDC and AVC at the same time, I would presume it will stop automatically.

We don't know what will happen with AVC's, but logically we won't be able to pay into 2 different and completely separate RM schemes at the same time.

If so, I assume the last weekly/monthly payment into the DBCBS will also mean the last contribution into Bonusplan & Flexiplan.

[heapsy]

Can't see the new scheme coming in until 2022 tbh.

[RobertT]

Legislation update:

2nd reading in the commons completed, next up is the committee stage, on a date to be announced.

[RobertT]

Legislation update:

The committee stage will take place on Tuesday 3rd November.

[milly]

If passed we may be looking at an implementation date begining of the tax year April 2021.

A few more months to pay into my Flexiplan and Bonusplan, I would imagine as you said payment will cease as you can't see how we can be a member of CDC and AVC at the same time, I would presume it will stop automatically.

If this new scheme is implemented and you can no longer contribute to AVC's it will be a major blow to many peoples retirement plans.

[Aquarius]

If passed we may be looking at an implementation date begining of the tax year April 2021.

We may be, but personally I think that's the earliest it'll be implemented. The second half of 2021 now seems more likely to me.

A few more months to pay into my Flexiplan and Bonusplan, I would imagine as you said payment will cease as you can't see how we can be a member of CDC and AVC at the same time, I would presume it will stop automatically.

We don't know what will happen with AVC's, but logically we won't be able to pay into 2 different and completely separate RM schemes at the same time.

If so, I assume the last weekly/monthly payment into the DBCBS will also mean the last contribution into Bonusplan & Flexiplan.

If the current AVC scheme closes - why can't they simply start a new AVC scheme when CDC pension start ?

[RobertT]

If the current AVC scheme closes - why can't they simply start a new AVC scheme when CDC pension start ?

They could, but the point is that the current AVC's(Bonusplan & Flexiplan) are part of the RMPP and are usually used to fund the tax free lump sum when taking NRA60 and NRA65 benefits. Many people have based their plans on paying into them until they retire and getting an £x amount of tax free cash.

CDC will be a completely separate scheme, so in my opinion it's unlikely we would be able to continue to pay into existing AVC's.

CDC will also have the Defined Benefit Lump Sum Scheme 'sitting alongside' it to provide a lump sum in a similar way to how the DBCBS currently provides one for mainly NRA65 benefits.

[Hawkey99]

So basically are you saying that with the DBCBS running alongside the new CDB scheme even if we are allowed to pay into a new AVC because of the 25% tax free amount many will stray into a lot of tax ?

[RobertT]

So basically are you saying that with the DBCBS running alongside the new CDB scheme even if we are allowed to pay into a new AVC because of the 25% tax free amount many will stray into a lot of tax ?

The DBCBS is part of the RMPP.
The DBLSS will be the lump sum element of CDC scheme.
They are not connected.

We don't yet know how value of the CDC scheme will be calculated. It might be a simple multiple as is the case with DB schemes, but will probably be less than 20x due to the un-guaranteed nature of the scheme. I think CWU's pension guru, Hillary Salt suggested 15x or 16x.
Or it may be a more convoluted method altogether.

If it's 15x then that would make the DBLSS about 16% of pot value based just on basic contributions going in. Add on the original proposal of an additional 1% of pay matched by RM, and you've got about 23%.
But in practice, investment returns would also be a factor.

So yes, from a tax point of view, there might not be much point in paying in drastically more over and above that proposed 1% matched contribution.

[Aquarius]

If the current AVC scheme closes - why can't they simply start a new AVC scheme when CDC pension start ?

They could, but the point is that the current AVC's(Bonusplan & Flexiplan) are part of the RMPP and are usually used to fund the tax free lump sum when taking NRA60 and NRA65 benefits. Many people have based their plans on paying into them until they retire and getting an £x amount of tax free cash.

CDC will be a completely separate scheme, so in my opinion it's unlikely we would be able to continue to pay into existing AVC's.

CDC will also have the Defined Benefit Lump Sum Scheme 'sitting alongside' it to provide a lump sum in a similar way to how the DBCBS currently provides one for mainly NRA65 benefits.

Sorry i am thick -

Why can't a new AVC scheme start tied to the CDC pension - nothing to do with any current pension schemes.

When the time comes - close the current AVC scheme
When CDC starts - new AVC scheme begins (prop a few months behind)

[RobertT]

If the current AVC scheme closes - why can't they simply start a new AVC scheme when CDC pension start ?

They could, but the point is that the current AVC's(Bonusplan & Flexiplan) are part of the RMPP and are usually used to fund the tax free lump sum when taking NRA60 and NRA65 benefits. Many people have based their plans on paying into them until they retire and getting an £x amount of tax free cash.

CDC will be a completely separate scheme, so in my opinion it's unlikely we would be able to continue to pay into existing AVC's.

CDC will also have the Defined Benefit Lump Sum Scheme 'sitting alongside' it to provide a lump sum in a similar way to how the DBCBS currently provides one for mainly NRA65 benefits.

Sorry i am thick -

Why can't a new AVC scheme start tied to the CDC pension - nothing to do with any current pension schemes.

When the time comes - close the current AVC scheme
When CDC starts - new AVC scheme begins (prop a few months behind)

As I said, they could open an AVC scheme tied to CDC and the original proposals included an option to pay an additional 1% into the DBLSS which would be matched by RM.
So you could say that an AVC arrangement is already planned!

For reference, the 1% matching option was included in the '2018 pension review' booklet dated February 2018, which you may still have a copy of.
It's also in the 4 Pillars agreement, which is available here.

As I also said in my reply to Hawkey99 above, once you've signed up to the 1% matching arrangement, your lump sum from the DBLSS might be getting quite close to the 25% tax free limit anyway(depending on exactly how the value of the CDC/DBLSS scheme is worked out).
So would there be any point in building up an even bigger pot?

But before the legislation is in place and the RM scheme is actually set up, we can only surmise.

[NWpostie]

And also considering since CDC has a planned NRA67, I wonder if the possible/proposed AVC would also be tied to NRA67 and any deductions if taken early ?

There are many things to think about during this process, as I'm nearly 7 years away from retirement, it's quite important for me to get my financial planning right first time.