Royal Mail ready to launch first U.K. collective DC plan

[heapsy]

A DC scheme could at least be taken at 60, alongside someones NRA60 pension. Therefore providing some continuity. Having three different pension ages will prove a minefield for some to negotiate regarding early payment in return for lower lump sums but getting the pension for longer etc. Depends on whether someone is capable of working longer. I think many in delivery wont be able to.

[renrag40]

Out of the blue appears a DC option when over the last 3 or 4 years there has been no mention of it in the literature provided by RM. The impression given has been you are join the new scheme whether you like it or not .......... if your not happy with it, make your own arrangements because the interim scheme and the present DC scheme will be closing to further accrual.
If RM are hoping to have the CDC scheme in operation early next year they are leaving it late to provide people with not only the relevant information but also the time to make an informed decision, given that we are all but in September now and the regulatory framework and guidelines have yet to be decided.
I have a feeling that RM may have recently received some updated expert legal opinion which may have thrown a spanner into the works. Why else would they suddenly bring out a DC option? .......... especially given that every person that opts for the DC option reduces the economies of scale that Is one of the selling points of CDC schemes but also one of the requirements for it to succeed in its aims.
Given the option of 19% going into a CDC scheme or 19% going into a DC scheme I would be going down the DC route and I have a feeling a fair few others would as well.

[RobertT]

Thinking about it, the reason a DC scheme will be available for new recruits is because of auto-enrolment rules.

Every employer has to offer a pension no more than 3 months after an individual starts a new job and meet certain criteria, which is to be aged 22+ and earn at least £10k. Those that don't meet the criteria can still request to join.

So as you'll need 1 years service to join CDC, offering a DC scheme to new starters was probably always going to happen!

What's new is that those eligible for CDC have the option to join that DC scheme instead!

At the moment RMPP members have the choice to opt out of the DBCBS and will therefore be auto-enrolled into the current DC scheme in due course, unless they either choose to join earlier or else opt out.
So I suppose you could say having the choice between CDC and DC is along similar lines to now in terms of us having more than one option.

The legislation and regulation has already taken longer than most people probably expected, and there's still some way to go. But we do seem to be coming to the end of it and a start date of maybe spring 2022 seems fairly likely to me.

A contribution rate similar to the 19.6% that'll be going into CDC, would definitely mean many people going the DC route instead, but personally I can't see the contributions being that high.
We'll have to wait and see on that.

The proposed basic workings of CDC haven't really changed much in the last 3.5 years since it was agreed via the 4 Pillars agreement.
We might not have received any info directly, and we probably won't until all the legal stuff is in place and everything in finalised. But there's been plenty to read online for those who wanted to look for it.

[renrag40]

Yes, precisely Robert, the DC option for those eligible for auto enrolment into the proposed CDC scheme is a new development and how poor it is that the people that it concerns are not the first to know about it. Instead the information has to be unearthed by someone who was willing to look for it, or more probably just stumbled across it. Piss poor communication as usual from RM.

[NWpostie]

I don't expect to be in CDC for more than 18 months at the most and it could be lot less.

30+ years section C and I've got something like 7-8 years remaining so it could be worthwhile by not putting all my eggs in one basket pensionwise, the only snag is NRA 67.

[RobertT]

I don't expect to be in CDC for more than 18 months at the most and it could be lot less.

30+ years section C and I've got something like 7-8 years remaining so it could be worthwhile by not putting all my eggs in one basket pensionwise, the only snag is NRA 67.

I've been in section C for 30+ years too, and I see CDC as a different basket to what I've already got. Either transferring it out into DC or going DC instead, just puts more into an existing basket.

For me personally, a very small pension and lump sum at 67 or an extra chunk in my DC provision, have both have got their pros and cons.
Initially I'll probably go with the one with the highest employer contributions, which I suspect will be CDC. I'll then have another decision to make further down the line.

[rogersh]

Robert, As you are aware Scottish Widows are the administrator for the DC scheme at present. Would they continue in this capacity in what appears to be an April 2022 implementation of the changes.
I was prepared to join the CDC scheme, but given the new development & the fact I will reach state pension age next year, it is probable I will opt for the DC scheme as my intention/need is to continue employment on my part-time contract for the time being.

[RobertT]

Robert, As you are aware Scottish Widows are the administrator for the DC scheme at present. Would they continue in this capacity in what appears to be an April 2022 implementation of the changes.
I was prepared to join the CDC scheme, but given the new development & the fact I will reach state pension age next year, it is probable I will opt for the DC scheme as my intention/need is to continue employment on my part-time contract for the time being.

I haven't got a clue whether SW will administer the 'new' DC scheme to be honest, but as the current providers of the RMDCP I think they're probably in pole position. That's assuming they want to do it?

If so, we don't yet know whether existing DC members will just keep their existing SW DC account or have a new one.
Either way, or if they use another provider altogether, transferring DC to DC shouldn't be a problem if desired.

It's expected the regulations currently being finalised will include the ability to transfer from CDC to DC.

The 'Anticipated CDC Design' booklet says members will be able to pay in beyond the NRA of 67 if they're still employed by RM.

Until everything is sorted and we get concrete details, there's still a lot we can't be 100% sure of!

[rogersh]

I understand, up until we are given the necessary information, there will be a lot of speculation. RM & the CWU will no doubt provide a detailed booklet with plan options, forecast comparisons etc. in the coming months.

[Woody Guthrie]

One of the major conditions of operating a CDC pension is that it has to be clear to the potential members exactly what it is they are buying into.

It was brought up at all the consultation phases that clarity of understanding and simplicity of communication were key. Not simple enough for someone with an in depth knowledge of pensions but simple enough for someone with no knowledge at all to understand.

Although it's early days I'm not sure Royal Mail have taken that on board.

[RobertT]

I'm expecting one of those A4 booklets we usually get when they're making pension changes or introducing a share scheme, etc.

The Q&A's on the My Royal Mail website says this on the subject:

Will you be sending out personal illustrations of the possible effect of CDC?

We understand that people want to see how the agreement will affect them personally. But, CDC is a completely new type of scheme and we are not clear yet on how the regulations will require us to show benefits at an individual level.

We included several example illustrations in the RMPP and RMDCP booklets, which we sent to members’ homes in February 2018. These illustrations seek to show how the target benefits under the proposed CDC scheme, with the Defined Benefit Lump Sum (DBLS) sitting alongside it, might (based on certain assumptions) compare variously with the RMPP, the RMDCP default contributions prior to 1 April 2018, the improved RMDCP from 1 April 2018, and the DBCBS. They cover a broad range of ages and lengths of service.

As we’ve said, the new arrangements will target, but not guarantee, a similar level of benefits to those currently provided by the RMPP. 

CDC aims to provide a pension of 1/80ths and a lump sum of 3/80ths of pensionable pay per year of membership.

Based just on current basic full time pay of £458 per week and not including any pensionable allowances or any increases or decreases in benefits, that equates to a pension of about £300 and a lump sum of about £900 per year of membership.

Many people struggle with how the current RM pensions work, and personally I can't really see that being much different with CDC.

It'll take a major effort to get even the basics across! Although there tends to be an apathy towards pensions anyway.