Pensionable Salary

[haggis1969]

My husband is applying for ill health retirement. Having looked at his payslips and pension statements, his pensionable salary is considerably less than his basic salary. Is this correct? We thought the pensionable salary should be at least the same as his basic.

[RobertT]

Sounds like he's in section C of the pension scheme? If so, he joined sometime between 1st April 1987 and 31st March 2008.

In which case he'll have the Lower Earnings Deduction taken off his basic pay to make his pensionable pay.

[haggis1969]

@RobertT.

Thanks for clarifying. Yes, he is Section C.

As you seem to be clued up on all of this, can I ask - he meets the criteria for Ill health retirement with immediate pension but OH has said he has the choice of the lump sum with deferred pension. As he is 55, could he take the IHR lump sum which we understand is 34 weeks’ pay and then claim his pension early or would he be better to take the immediate pension option? He has worked for Royal Mail for 30 years.

[RobertT]

The lump sum is 34 weeks pay tax free + (I think)12 weeks payment in lieu of notice, which is taxable.

His deferred pension could be taken anytime after age 55, but would be reduced by 5% per year if taken before Normal Retirement Age(NRA).
So if he took it all at 55, his NRA60 would be reduced by 25% and his NRA65 by 50%.

Whereas, I'm assuming the immediate pension option would mean no reductions?

Without knowing any figures, it's impossible to say which is the better choice. But over the longer term, I would suggest a full pension is better than a reduced one even with the IHR lump sum upfront.

Ultimately it's a case of doing your maths, and not only coming to the best financial choice, but the best life choice too. Which is something only you can decide.

[haggis1969]

Hi Robert or anyone else in the know!

My husband was given the paperwork for his ill health retirement yesterday and is being asked to make a decision today, with immediate ill health retirement and a payment of 12 weeks in lieu of notice.

He wishes to take immediate pension, but there is also a letter about an RMG lump sum or UNUM plan that pays over 3 years. Is this different to the lump sum with deferred pension? The manager seems to be as confused as us and we don't want to sign the wrong thing and not get the full pension.

Thanks

[RobertT]

I'm no expert on IHR, but my understanding is that the options changed a few years ago as part of the 4 Pillars agreement.

Previously it was:

34 weeks pay + 9 or 12 weeks PILON(dependent on service) if you're deemed to not be able to work for RM again; or

Immediate payment of pension, not only unreduced if taken before NRA but increased. But only if you're deemed not able to work at all.

It is now:

34 weeks pay + PILON; or

3 years of 50% of pensionable pay with a possible lump sum after the 3 years, depending on health conditions.


Taking his pension will be a separate thing from the above. So if you want to do that, you'll have to contact the RMPP/RMSPS or Scottish Widows, depending on which applies.

[haggis1969]

He has been deemed not to be able to work at all for any organisation and is Section C.

He has one letter with the figures for the lump sum plus PILON or the 50% salary over 3 years which he needs to choose between and then a separate letter also mentioning ill health retirement with Immediate pension and PILON. That's why we thought it was either/or.

However, his manager is asking him to pick an option and sign the first letter and also sign the second. Tried phoning HR but no reply.

[RobertT]

So it sounds like there's a 3rd option of:

Immediate payment of pension + PILON?
In practice it wouldn't be immediate, because these things take at least 3 months to sort out. Although I assume the PILON would come through quickly.

Isn't there a union rep involved to guide him? There should be!

[haggis1969]

There is, but nobody seems to be clear.

[heapsy]

If the unit rep. and the office manager don't know then perhaps the area rep. or divisional rep. might help. Your husband should be able to get their numbers from the unit rep. Or the manager should be able to find out by ringing Sheffield.