Paying extra into your pension

[RobertT]

Personally I have investments held in AVC's, a personal pension and an equity ISA.
As I've approached retirement I've de-risked the AVC's and PP to some degree as I'm relying on that money to live on and don't want it to be too susceptible to market volatility.

But I have no definite use for the money held in the ISA. I could end up using it to help fund a house move which is something I want to do at some point, or I could just use it as extra income. So in practice I've probably been a bit more cavalier with those investments.

Taking some profit is a fair point although that 350% I mentioned equates to a fairly small amount of money. I actually have other funds that have gone up by a lower percentage but by a lot more money and it's those I could probably do with taking profits from.
Different funds do indeed behave differently.

Thanks for the input.

[yellowbelly]

Good thread this one, as always interesting and informative from RobertT, you've certainly got
to educate yourself to look after yourself these days!

[RobertT]

Good thread this one, as always interesting and informative from RobertT, you've certainly got
to educate yourself to look after yourself these days!

I like that!

The first thing you need to do to educate yourself about your own retirement, is to look at your annual pension statement and ask yourself it it's going to pay out enough to enable you to retire when you want to.
If it's not, then either do nothing and resign yourself to a long working life, or try to save a bit extra.
Use what you've already got as a base and build on it!

You don't necessarily have to save huge amounts of cash, as small sums over a long period of time can grow into decent pots of money by the time you're ready to give up work. So try to start as early as possible and increase your savings as you get pay rises, etc.

Always take advantage of maximum employer contributions!

Equities will generally always out perform cash over the long term, and personally I've had more in tax breaks via tax relief and PSE by paying into AVC's and my personal pension, than I would have got in interest if I'd put the same amount over the same period of time into a building society account.
But I've also had investment growth on top, which also far outweighs the interest I would have got, and then some!

In short: Take an interest in your own retirement, educate yourself reasonably well by learning how to invest your savings efficiently and keep the faith. It's a slog, but stick to your plans(which may evolve over time) and you should reap the rewards.

[Decky Boy]

I'm gonna change gear here slightly and ask what impact the new NHS and Social Care Levy ( which will commence early April next year) will have on AVC contributions ? It's a good few months away so no immediate need to alter our weekly payments to comply with PSE requirements and minimum wage !

I'm thinking that each £100 we pay into our AVCs will soon cost us only £66.75 but off course we'll clear less in take home pay as a result of paying the new higher National Insurance payments.... which are to increase by 1.25% .

Members and colleagues paying into AVCs will need to reexamine their weekly contributions ( especially if paying in larger amounts) if they wish to take full advantage of PSE ??? But of course the AVC scheme may close when the new Royal Mail Pension comes into being ?

[david3595]

I'm gonna change gear here slightly and ask what impact the new NHS and Social Care Levy ( which will commence early April next year) will have on AVC contributions ? It's a good few months away so no immediate need to alter our weekly payments to comply with PSE requirements and minimum wage !

I'm thinking that each £100 we pay into our AVCs will soon cost us only £66.75 but off course we'll clear less in take home pay as a result of paying the new higher National Insurance payments.... which are to increase by 1.25% .

Members and colleagues paying into AVCs will need to reexamine their weekly contributions ( especially if paying in larger amounts) if they wish to take full advantage of PSE ??? But of course the AVC scheme may close when the new Royal Mail Pension comes into being ?
[/

I think the big question we all need answered is will AVC’s continue once new pension scheme kicks in April 2022 ?

[david3595]

Assuming it’s April 2022 of course for start date

I'm gonna change gear here slightly and ask what impact the new NHS and Social Care Levy ( which will commence early April next year) will have on AVC contributions ? It's a good few months away so no immediate need to alter our weekly payments to comply with PSE requirements and minimum wage !

I'm thinking that each £100 we pay into our AVCs will soon cost us only £66.75 but off course we'll clear less in take home pay as a result of paying the new higher National Insurance payments.... which are to increase by 1.25% .

Members and colleagues paying into AVCs will need to reexamine their weekly contributions ( especially if paying in larger amounts) if they wish to take full advantage of PSE ??? But of course the AVC scheme may close when the new Royal Mail Pension comes into being ?
[/

I think the big question we all need answered is will AVC’s continue once new pension scheme kicks in April 2022 ?

[NorthernBoy]

I'm gonna change gear here slightly and ask what impact the new NHS and Social Care Levy ( which will commence early April next year) will have on AVC contributions ? It's a good few months away so no immediate need to alter our weekly payments to comply with PSE requirements and minimum wage !

I'm thinking that each £100 we pay into our AVCs will soon cost us only £66.75 but off course we'll clear less in take home pay as a result of paying the new higher National Insurance payments.... which are to increase by 1.25% .

Members and colleagues paying into AVCs will need to reexamine their weekly contributions ( especially if paying in larger amounts) if they wish to take full advantage of PSE ??? But of course the AVC scheme may close when the new Royal Mail Pension comes into being ?

Yes from next April once the new increase in ni comes in you will save an extra 1.25% if paying avcs / pension via salary sacrifice.

However what is not clear is what happens when the new tax increase becomes a separate tax from April 2023 onwards and ni returns to its normal level,

The question is will the new tax be eligible for salary sacrifice? It might be or it might not, I have got the feeling that it won’t and salary sacrifice will only apply to ni and income tax.

Could be totally wrong on this but only time will tell.

[RobertT]

I think the big question we all need answered is will AVC’s continue once new pension scheme kicks in April 2022 ?
Assuming it’s April 2022 of course for start date

For a clue as to what will happen to the current AVC(Bonusplan & Flexiplan) arragements, think back to the booklet we received when RM first announced the RMPP was going to close to future accrual and everyone will be put in the DC scheme.

It said that Bonusplan would stop, but any payments into Flexiplan would continue and would go into the DC scheme instead, unless you chose to stop them.

See this now out of date stickie for a recap: viewtopic.php?f=27&t=77960

The 4 Pillars negotiations followed and CDC was decided on as the way forward for RM pensions.

As CDC will be a completely different and separate scheme to every other RM pension, personally I think it's clear that we will no longer be able to pay specifically into Bonusplan or Flexiplan once the CDC scheme starts. That's because you have to be an active member of the RMPP to pay into either of those two schemes and we'll all effectively become deferred RMPP members over night when CDC starts.

What is unclear is whether there'll be any ability to pay extra into CDC.

The original plans said we'll be able to pay an extra 1% into the lump sum section(the DBLSS), which would be matched by RM.
See the 4 pillars agreement: https://www.cwu.org/wp-content/uploads/ ... ow-res.pdf

But as far as I know that hasn't been mentioned since and there's never been any mention of a new AVC along similar lines to Flexiplan or the possibility of being able to buy additional CDC years.

I hope I'm wrong about the current AVC' s because i know many have based their plans on paying them until they leave RM. But we'll just have to wait and see!

There's nothing particularly relevant about April, of any year, for the start date of CDC.

[RobertT]

For those of you wanting to continue with AVC's when the CDC/RMCPP scheme starts, there is a glimmer of hope in the PDF file attached to the recent announcement of a members consultation.
https://www.cwu.org/wp-content/uploads/ ... LTB396.pdf

Where it says: “If members make AVCs (Additional Voluntary Contributions), they can choose how these are invested”.

Although there is no mention of exactly where those AVC's will be going.

[RobertT]

Further to my previous post:

If you look at the new info on My Royal Mail it says this about AVC's:

Could I pay in a different amount? 

You cannot pay in less than 6%, but there are two ways you could save more:

Lump Sum Booster - You pay an extra 1% of your Pensionable Pay into the cash lump sum section of the Plan. Royal Mail pays in another 1%. This boosts your cash lump sum. We expect this boost to be 2.2% of your Pensionable Pay, but this could change. 

AVCs - Additional Voluntary Contributions build up a pot of pension savings alongside your income and cash lump sum.

You'll stop making AVC's into the RMPP or RMDCP, but the ones you've already made will stay invested, and you can start making AVC's into the collective plan.

Also, any decision to opt out of RMCPP would mean the only other option is a Nest DC scheme with contributions of 5% employee/3% RM.

[heapsy]

Doesn't everyone find it strange that the example figures for pensionable pay never actually seem to fit anyone's true income?
These documents are completely useless. As it also says, target figure*, so the chances of them being accurate are about as likely as Elvis coming back.

[RobertT]

Doesn't everyone find it strange that the example figures for pensionable pay never actually seem to fit anyone's true income?

Not really, as they're just examples!
As long as you know your pensionable pay, it's very easy to work out how much pension and lump sum you'll be accruing each year.

These documents are completely useless. As it also says, target figure*, so the chances of them being accurate are about as likely as Elvis coming back.

Considering the pension only aims to provide a pension at a certain level and can go up and down, what exactly do you expect?
Find me someone who knows how much my wages, inflation rates and investment returns will be 10, 20, 30+ years into the future and I'll ask them to pick my lottery numbers.

[heapsy]

My point is that there are many on here and in RM, that haven't got a clue about their pension, you've only got to read the questions posted. That should tell you that what you are saying might not be the case.

[RobertT]

My point is that there are many on here and in RM, that haven't got a clue about their pension, you've only got to read the questions posted. That should tell you that what you are saying might not be the case.

Yes there's lots that don't understand pensions at all and there's lots that don't even try!
There'll probably be a fair few who just bin the RMCPP booklet and then in a few years time moan they can't retire when they want to.

As someone on here said recently, 'your have to educate yourself to help yourself'.

Sorry but what am I saying that might not be the case?

[heapsy]

I meant that the examples given, for some at least, might not be easy for them to work with. I'm able to use the examples, but it seems that many don't seem able to do so, in order to work things out for their particular situation. You only have to read comments and questions on the various threads to see that is the case. For example, where people have differing or even no pensionable allowances, and others do. It muddies the waters for some at least.