offer to join DBCBS

[Dexydog]

Got a letter this morning giving me the option of joining DBCBS instead of RMDCP.
Read all the bumf, but tbh have now got acronym brain freeze.
From what I can gather-
You come out of the Scottish Widows one, go into this one instead which gives
1. 13.6% company contributions instead of 10% (plus another 2% towards other benefits which you get with RMDCP anyway, so basically an extra 3.6%.
2. builds up more of a cash pot, from what i can see/understand.
3. slightly less risk as RM bears some of burden, so you're not fully left bare to stock market variances. (I know you can choose to put your RMDCP into a cash only portfolio or something equally pretty much risk free.
So on the face of it, bit of a no brainer if you don't want risk without having to mess about with where your pot is invested.
However, is there a catch here I'm missing?
I will be retiring in less than 2 years, so at the the back of the booklet it mentions if you haven't been in the DMCBS for a minimum 2 years they return your contributions- plus no doubt your tax will be inaccurate; does this mean I might as well not bother given my retirement plans?
Pros/cons/thoughts most welcome as I really don't think I understand it fully or at least enough to make an informed decision.

[RobertT]

Nobody can really give you a yes or no answer as to whether to join the DBCBS, as it will always come down to personal choice and circumstances to one degree or another.

Personally if I was in the RMDCP I think I'd want to stay in it, but my advice is to to take your time in finding out about the pros and cons of each scheme and make a decision that suits you.

Full RMDCP details are here: https://www.scottishwidows.co.uk/save/royalmaildcplan/
DBCBS(section F) details here: https://www.royalmailpensionplan.co.uk/section-f

Also bear in mind the CDC scheme is due to start in the relatively near future(we don't know exactly when yet), and that will replace all existing RM pension schemes.

[Dexydog]

Thanks Robert.
Been doing a bit of research and I think, on balance, I might as well stay as I am, as there's a very good chance I may be leaving, perhaps by April next year.
The Scottish Widows one seems to be doing ok and I'm putting the max of AVC's in there to keep in PSE.

[Schiff]

Got a letter this morning giving me the option of joining DBCBS instead of RMDCP.
Read all the bumf, but tbh have now got acronym brain freeze.
From what I can gather-
You come out of the Scottish Widows one, go into this one instead which gives
1. 13.6% company contributions instead of 10% (plus another 2% towards other benefits which you get with RMDCP anyway, so basically an extra 3.6%.
2. builds up more of a cash pot, from what i can see/understand.
3. slightly less risk as RM bears some of burden, so you're not fully left bare to stock market variances. (I know you can choose to put your RMDCP into a cash only portfolio or something equally pretty much risk free.
So on the face of it, bit of a no brainer if you don't want risk without having to mess about with where your pot is invested.
However, is there a catch here I'm missing?
I will be retiring in less than 2 years, so at the the back of the booklet it mentions if you haven't been in the DMCBS for a minimum 2 years they return your contributions- plus no doubt your tax will be inaccurate; does this mean I might as well not bother given my retirement plans?
Pros/cons/thoughts most welcome as I really don't think I understand it fully or at least enough to make an informed decision.

As RM don't seem to publish the full details of the scheme it is unclear how any reduction for taking the DBCBS is calculated so how much of a deduction you would face in your particular circumstances. Pretty poor by RM in my opinion.

In the DBCBS your personal contributions would be slightly lower, so giving you a chance to pay more into AVCs.

The killer for you is that you intend to leave in less than 2 years. My reading is that you would only get back your contributions and not those made by RM (but as RM only publish a summary instead of the full scheme rules then it may just be poor wording in that summary) so in your circumstances I would avoid this like the plague.
Edit: Actually the scheme booklet says that ...If you have less than 2 years pensionable service in the DBCBS you will be offered a refund of your own contributions less a tax deduction. Alternatively, DBCBS members who leave the scheme will be able to transfer out their DBCBS benefits if they wish.
Nobody joining the scheme now will get 2 years pensionable service in the scheme before it is closed with the introduction of the new CDC scheme.

[Dexydog]

Thanks,
I kind of understand it a little better now, came out the blue this morning, knew nothing about it- or the new CDC scheme.
Just gonna stick with what I have now I think.

[badger1]

Does anyone know the date CDC starts, wanted time to get my pension moved before it starts

[RobertT]

Does anyone know the date CDC starts, wanted time to get my pension moved before it starts

The last official statement from RM was that they were hoping to implement CDC before the end of the current financial year(2021/22), but as there are still a few more hurdles to jump over beforehand, there is currently no set date.

Info here: https://tamebay.com/2021/02/royal-mail- ... ssent.html


Which RM pension are you in and why do you want to move it?

[badger1]

Hi Robert, in DC plan, also in old RM pension. Just don’t trust it and a DC pension suits me better. I saw Mondelez who are changing their pensions opted against CDC as it was deemed too risky for all parties

[RobertT]

Hi Robert, in DC plan, also in old RM pension. Just don’t trust it and a DC pension suits me better. I saw Mondelez who are changing their pensions opted against CDC as it was deemed too risky for all parties

It's fair to say that CDC isn't everyone's cup of tea, but that doesn't really explain why you want to move your existing RM pension/s.

[badger1]

I would keep it in if I could remain in the DC plan

[RobertT]

I'm not 100% sure, but I'm not sure you can transfer your RM DC plan and carry on paying into it.
So it would be more logical and cost effective to transfer after the CDC scheme starts.

Obviously factors such as investment returns and fund costs would need to be considered.

The legislation for CDC is expected to include the option to transfer out into an individual DC pension, although how it would be valued is an unknown at the moment. So opting out of CDC would mean saying no to RM's 13.6% contribution.

As for any DB benefits you may have, only pension accrued after 1st April 2012 can be transferred to DC. Benefits before that date can only be transferred into another DB scheme.

[badger1]

Thanks again for your help Robert, if only our employer was a helpful as you !

[Alantidey]

Thanks for that. Very interesting post.

I’m likely to be in the same boat in a couple of months when I’d have completed my first 5 years in the job.

My thoughts are that I’ll stay as I am in the DC scheme. I’m aiming to be in the job for probably another 10 years, whilst maximising my pension contributions in the most tax efficient way.

Currently contributing the maximum plus the maximum AVC’s that keep me within PSE limits.

Not likely to want to take a cash lump sum on retiring so will be wanting maximum monthly return.

Obviously CDC, when it’s introduced, may affect this plan.

[RobertT]

Thanks for that. Very interesting post.

I’m likely to be in the same boat in a couple of months when I’d have completed my first 5 years in the job.

My thoughts are that I’ll stay as I am in the DC scheme. I’m aiming to be in the job for probably another 10 years, whilst maximising my pension contributions in the most tax efficient way.

Currently contributing the maximum plus the maximum AVC’s that keep me within PSE limits.

Not likely to want to take a cash lump sum on retiring so will be wanting maximum monthly return.

A DC pension gives you a number of options, one of which is to buy an annuity which provides an income for the rest of your life, plus death benefits if you want them.
However, the rates are very low – at age 65 expect about 5% of your annuity pot per year for a level/single life income. Less if you also want inflation proofing and/or a spouses pension.

But DC schemes also offer the choice of drawing down your cash over a period of time of your choice, meaning you could maximise your income for a shorter time, until your reach state pension age for example.

Also consider that pension income is treated the same way as your wages as far as income tax is concerned. So taking the tax free lump sum upfront will potentially protect that money from the taxman.

But everyone's circumstances will be different!

Obviously CDC, when it’s introduced, may affect this plan.

It probably will one way or another!
The scheme aims to pay out a tax free lump sum and a targetted pension for life, so will definitely need to be factored into your plans.

The ability to pay AVC's may be limited with CDC.

[Alantidey]

Thanks RobertT