CDC legislation update

[RobertT]

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.

The additional 1% matched contribution would go into the DBLSS along with your basic contributions. As far as I'm know, the DBLSS will also have an NRA of 67 and reduced if taken early.
The DBLSS will be broadly the same as the current DBCBS, in as much as the sum total of the contributions going in are guaranteed, with the addition of annual bonuses if investment returns allow.

If they did actually decide to introduce another AVC similar to Flexiplan tied to CDC, then I assume similar rules would apply. So it could be used to fund extra lump sum with your CDC benefits or transferred out independently.

But we just don't know too many details at the moment.

[mr hil.]

I don't see why the current AVC schemes have to close, I, like many others, have calculated how much to pay over the years to get as close to the 25% Maximum lump sums funded by the AVC and DBCBS without sacrificing any pension or straying into paying too much extra tax. To now close both these schemes would be wrong. I accept that the Flexiplan may need to go where RM pay a contribution but we should still be able to use Salary Sacrifice to pay into the remaining scheme up until the respective NRA's.

Pensions are a long term investment and the planning I have done was based on continuing with the AVC payments up until retirement. If there is an announcement to close both current AVC schemes I will be raising my objections with anybody who will listen and can help. Royal Mail actually benefit from reduced NI contributions due to these schemes so it would be in their interest to continue them. Is there any point in law that says they have to close just because the schemes they are attached to are closed, I don't think there can be because they would have had to be closed when the pension was "CLOSED TO Future Accrual" in 2018.

[RobertT]

I don't see why the current AVC schemes have to close, I, like many others, have calculated how much to pay over the years to get as close to the 25% Maximum lump sums funded by the AVC and DBCBS without sacrificing any pension or straying into paying too much extra tax. To now close both these schemes would be wrong. I accept that the Flexiplan may need to go where RM pay a contribution but we should still be able to use Salary Sacrifice to pay into the remaining scheme up until the respective NRA's.

Pensions are a long term investment and the planning I have done was based on continuing with the AVC payments up until retirement. If there is an announcement to close both current AVC schemes I will be raising my objections with anybody who will listen and can help. Royal Mail actually benefit from reduced NI contributions due to these schemes so it would be in their interest to continue them. Is there any point in law that says they have to close just because the schemes they are attached to are closed, I don't think there can be because they would have had to be closed when the pension was "CLOSED TO Future Accrual" in 2018.

You currently have to be an active employee member of the RMPP and paying in the DBCBS to also pay AVC's into Bonusplan and Flexiplan.
Although the RMPP closed to future accrual in 2018, it didn't close completely as we're accruing more RMPP benefits via the DBCBS.
Infact a new section was created(section F) for those with at least 5 years in the RMDCP, who wanted to pay into the DBCBS instead.

In my opinion and at the moment that's all it is, we won't be able to continue to pay into Bonusplan and Flexiplan when CDC starts, because they will be totally separate schemes.
Any more than we can't currently pay into the RMDCP and RMPP at the same time.

I appreciate the comments on people making plans and also the salary sacrifice element, but paying into existing AVC's once CDC starts will effectively mean increasing the liabilities for both the RMSPS and RMPP going forward and that in my mind, is something the government nor RM will want to happen.

But I hope I turn out to be wrong!

[RobertT]

Further to the 'will the current AVC's continue' debate, I've found the original booklet we received around Christmas 2016(if I remember correctly) when RM first announced they were going to close the DB scheme in April 2018 and replace it with a DC plan. The 4 Pillars negotiations then followed which resulted in the joint agreement to push for a CDC pension.

There's a few pages of Q&A's in the booklet, three of which relate to AVC's and are paraphrased below:

Addplan - You will not be able to buy any more additional pension, but your contributions will continue as extra payments into the DC plan, unless you instruct otherwise.
Bonusplan - Contributions will stop.
Flexiplan - Contributions will continue but as extra payments into the DC plan, unless you instruct otherwise.

So basically no ability to continue to pay into AVC's because the RMPP would have closed completely at 31st March 2018.
As things transpired the RMPP stayed open because the DBCBS was created as a transitional scheme until CDC is legislated for, etc.
Therefore when the CDC starts, personally I see no reason why the RMPP won't close at that point and therefore no more AVC's into Bonusplan or Flexiplan.

We'll have to wait and see if there's any option to pay in more, other than the already proposed 1% into the DBLSS, matched by RM.

[RobertT]

Legislation update:

Committee stage completed, next up is the report stage which due to take place on Monday 16th November.

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

[heapsy]

I'm slightly confused. With the new pension scheme, where will the lump sum come from?

[RobertT]

I'm slightly confused. With the new pension scheme, where will the lump sum come from?

It'll come from the Defined Benefit Lump Sum Scheme.

We'll be accruing a pension of 1/80th pensionable pay via CDC, and a lump sum of 3/80ths via the DBLSS.

The total 19.6% of contributions will be split as follows:

CDC:
RM – 11.2%
Employee – 4%

DBLSS:
RM – 2.4%
Employee – 2%

More info on how things will work is here: https://www.myroyalmail.com/2018pensionreviewqanda" onclick="window.open(this.href);return false;

*In the 4 pillars document the DBLSS was referred to as the DBCBS, but that was changed to avoid confusion with the current scheme. They will operate in a similar way, but are completely separate from each other.

[heapsy]

[RobertT]

Legislation update:

It seems that both the report stage and the 3rd reading happened in the Commons yesterday(16/11/20), meaning next up is the penultimate stage – the consideration of amendments, which is also known as 'ping-pong'.

No date has yet been set for that to begin.

https://services.parliament.uk/bills/20 ... hemes.html

[tractorboy2]

Do you have to join the CDC scheme ?, I plan to retire by this time next year , would be pointless paying in to it for 7 or 8 months.
That's if it gets the go ahead and starts in April.

[RobertT]

Do you have to join the CDC scheme ?, I plan to retire by this time next year , would be pointless paying in to it for 7 or 8 months.
That's if it gets the go ahead and starts in April.

I personally think that April 2021 will be a bit too soon for the RM CDC scheme, and it will probably start sometime during the second half of the year. So you won't build up much pension if you're planning on leaving in late 2021.

But all the legislation documentation suggests there will be the choice to transfer out a cash equivalent amount into an individual DC pension arrangement. Meaning you can still take advantage of the tax breaks and RM's contributions while you're still employed.

It might not add up to much but it's better financially than not being a member.

It's obviously your choice and you can opt out if you want to, but there will be no option to carry on paying into your current RM pension scheme.

[RobertT]

Legislation update:

The Pensions Bill has been returned to the House of Lords for them to consider the amendments made by the House of Commons. The date set for that is Tuesday 19th January.

There was only 5 amendments made.
If the Lords agree with them, it'll be a quick process, if they don't they can make further amendments themselves to hand back to the Commons for their consideration, and it could go back and forth for a while.

When that is completed, the next and final stage is Royal Assent.

https://services.parliament.uk/bills/20 ... hemes.html

[RobertT]

Legislation update:

The Lords have considered and approved the amendments. Just Royal Assent to go.

[heapsy]

Assuming approval, are we talking weeks before it comes in? I'm wondering if it's worth putting our pay rise into the Flexi plan before it closes.

[NWpostie]

Once the CDC comes in and AVC stops,probably time for me to look for another savings account to build another fund for my retirement.

I take it the AVC payment will probably stop automatically, I would imagine before CDC comes in the trustees will write to all of us as to what will happen next.

From what I understand so far the CDC has an NRA of 67 which I'm not too keen on.