Royal Mail plan should I join?

[blacov]

Hi,

I have been in the business for quite some years now however for various reasons I had to opt out from the plan just little over a year since joining RM. I am now considering to go back to the plan and resume contribution. Is it worth it or will I be better off with some private investment plan.
I am in my early 30s so there are many years to go but I think it's time to think about times when body will be too battered to carry on working. What happens to the money if I decide to leave the business in 5-10years time?

Can someone shed some light on it? I heard that royal mail pension used to be very good but they managed to wreck it and it is no longer this lucrative. Is there some place where I can look up projected figures and play with percentage of contributions?

[RobertT]

You can currently join the RM Defined Contribution Plan administered by Scottish Widows. Was that the one you joined previously(it was previously administered by Zurich but transferred to SW in 2019?).
The maximum contribution levels are:

Employee 6% of pensionable pay
RM 10% of pensionable pay.

The RMDCP only uses basic pay for pension purposes, plus overtime upto full time hours for part time staff.

So if you're full time and earning £441 per week your gross pension contribution will be around £26.50 per week. But......

You will get the benefit of tax relief and PSE, which means your income tax bill will reduce by 20p for every £1 you contribute and your NIC's will go down by 12p of each £1. Meaning that gross contribution will only actually cost you £18.

Plus you'll also get RM's 10% contribution of another £44, making a total of £70.50 going in each week, which is only costing you £18!

Full details on the websites:

https://rmdcp.uk
https://www.scottishwidows.co.uk/save/royalmaildcplan/

Joining is a no-brainer!

Bear in mind that all current RM pension schemes are expected to be replaced by the planned CDC scheme in the relatively near future, once the required legislation has been passed and the scheme set up. Info here: https://www.myroyalmail.com/2018pensionreviewqanda

But I can't see any reason for you to not take advantage of all that free money while you can.

There are plenty of pension calculators online if the Scottish Widows version doesn't help.

If you leave RM, the money in the RMDCP will still be there for you to access from the minimum legal age at the time, currently 55 but expected to increase to 57 in 2028 and then 10 years lower than state pension age as that slowly rises.
You will also be able to transfer it to another DC scheme with another employer or held privately by you.

[blacov]

This is great news. I have found some paperwork and I have some money in Zurich fund which I am able to pay out less than tax or transfer whole thing and keep both my contributions and those made by RM. Could you specify what is going to happen to current plan? Why there are changes to be made?

Oh almost forgot. Thank you very much for your very informative post.

[koolishy67]

Yes he is right cost you only £18 and going in your pension pot £70 free money

[RobertT]

This is great news. I have found some paperwork and I have some money in Zurich fund which I am able to pay out less than tax or transfer whole thing and keep both my contributions and those made by RM. Could you specify what is going to happen to current plan? Why there are changes to be made?

Oh almost forgot. Thank you very much for your very informative post.

It sounds as if your money was transferred over from Zurich to Scottish Widows and so you would already have a RMDCP pension in place with SW. I suggest you get in touch with them and ask.
Contact details are in the plan guide, available via the SW link in my previous post.

RM and CWU came up with a plan during the 4 Pillars negotiations in 2017/18 to provide a salary based pension for all employees – Collective Defined Contribution(CDC).

It aims to provide an un-guaranteed pension of 1/80ths and a guaranteed lump sum of 3/80ths of pensionable pay for each year worked, whereas at the moment all you're doing with the RMDCP is building up a pot of money, which you have options with.
Info here: https://www.moneyadviceservice.org.uk/e ... on-schemes

CDC is regarded as the better option for current RMDCP members and RM aren't willing to provide a Defined Benefit scheme, as they would be liable for any shortfalls in its funding. CDC is a middle ground between the two.
A DB scheme is where the benefits are guaranteed and generally increase with inflation until you die. RM used to offer them to all employees who joined the company before April 2008. They are valuable things to have and can cost employers £Billions.

When CDC starts, your RMDCP cash will still be with SW until you reach an age where you're able to access it, or you transfer it to another similar plan.

Pensions can be quite confusing with the various terms like DC, DB, etc. So if you want to do some homework on the subject, I suggest Google and plenty of time!