Royal Mail pension news and discussion.Please note the advise given in this forum is unofficial, please use the links we have for a more detailed response or see an independent financial adviser.
FAB wrote:I assume that once CDC does get introduced that Bonus Plan and perhaps Flexiplan will stop?
There's no literature to confirm as far as I'm aware, but you currently have to be an active employee member of the RMPP to pay into Bonusplan and Flexiplan.
As CDC will be a completely new and separate scheme, I'm assuming we'll become deferred members of the RMPP and so no longer be able to pay AVC's.
If that is the case, what you've already saved up will still be used to fund the tax free lump sum when taking your RMPP(NRA60 & NRA65) benefits, exactly as it is now.
CDC will have the Defined Benefit Lump Sum Scheme 'sitting alongside' it to provide a tax free lump sum on the commencement of your CDC benefits.
Out of the total planned 19.6% of contributions, RM will pay 11.2% into CDC and 2.4% into DBLSS. While employees will pay 4% into CDC and 2% into DBLSS.
The plan is that we will be able to increase our lump sums by paying an additional 1% of pay into the DBLSS, which would be matched by RM.
My advice would be to max out your AVC's while you've got the chance, preferably sticking within PSE limits. If the above doesn't happen, you can always reduce them again later.
Quick question for you Rob. I started paying into both Bonus plan and Flexi plan quite late. I currently have around 20k combined. Assuming the AVCs are stopped, would I be able to just take the AVCs as my lump sum? I'm thinking that they may not make up the full 25% of my pension, and couldn't afford to reduce my pension further. I'm section C.
That's also my concern as well. As we are now in a mixed set of pension schemes final salary/career average/DC scheme now this CDC assuming it comes in.
I would like to be able to take a 25% tax free lump sum without sacrificing part of my main pension which was the point of the AVC, what's going to happen to that option ?
Six of Nine loves Seven of Nine, together in Electric Dreams.
heapsy wrote:Quick question for you Rob. I started paying into both Bonus plan and Flexi plan quite late. I currently have around 20k combined. Assuming the AVCs are stopped, would I be able to just take the AVCs as my lump sum? I'm thinking that they may not make up the full 25% of my pension, and couldn't afford to reduce my pension further. I'm section C.
You can take a maximum of 25% of your 'total pot value' as tax free cash, but you can take less than 25% if you want to.
If your AVC's equal 25% or less, then you just take the AVC's tax free.
NWpostie wrote:That's also my concern as well. As we are now in a mixed set of pension schemes final salary/career average/DC scheme now this CDC assuming it comes in.
I would like to be able to take a 25% tax free lump sum without sacrificing part of my main pension which was the point of the AVC, what's going to happen to that option ?
You will still be able to use whatever is in your AVC's to fund the tax free cash when taking your NRA60 & NRA65 benefits, as long as it's no more than 25%. Plus you will also have the Cash Balance(DBCBS).
If the money in your AVC's is less than 25% at the point of taking your benefits, then ultimately there won't be much you can do about that. But it will still be invested in the fund/s of your choice until you take it, so still has the potential for growth.
Personally I haven't paid into my Flexiplan in this tax year and it's still increased by a 4 digit amount.
I think no longer being able to pay into the current AVC arrangements is probably the most likely outcome when CDC begins. But nothing has been announced yet!
The CDC NRA is 67.
I am currently in the DC scheme & understand closure on implementation of CDC.
I received this response from Zurich Royal Mail Service Team in 2017. I can confirm that as long as you work for Royal Mail you are eligible to pay into the plan.
In the CDC scheme, if you continued to work beyond 67 would employee/RM continue to pay contributions until you chose to retire?
If the AVC was to cease with advent of the CDC then I would max out my Royal Mail SIP to take advantage of the PSE then when it matures I would put it in my SIPP and receive a further 20% tax relief.
It would be scant consolation for losing the AVC.
rogersh wrote:The CDC NRA is 67.
I am currently in the DC scheme & understand closure on implementation of CDC.
I received this response from Zurich Royal Mail Service Team in 2017. I can confirm that as long as you work for Royal Mail you are eligible to pay into the plan.
In the CDC scheme, if you continued to work beyond 67 would employee/RM continue to pay contributions until you chose to retire?
Subject to employer policy from time to time, members would have the following options.
Retire early on an actuarially equivalent reduced pension.
For members still in RMG service beyond 67, continue to build up pension (and receive the same increases / cuts over that period as other members) beyond 67 until they leave RMG.
Take a transfer value to another HMRC registered pension plan. The transfer value amount would be determined as the member’s share of the Section’s total assets. This share would be determined on a basis consistent with that used to determine the annual increases/decreases, but updated to allow for Section asset return and other experience to the date of transfer.
Full commutation (on cost neutral terms) for small lump sums or on serious ill-health would be allowed on transfer value (ie share of fund) terms.
In practice we'll have to wait and see what the legislation says on all aspects of CDC. But personally I'd be surprised if the final RM CDC scheme looks drastically different to the anticipated version.
heapsy wrote:Quick question for you Rob. I started paying into both Bonus plan and Flexi plan quite late. I currently have around 20k combined. Assuming the AVCs are stopped, would I be able to just take the AVCs as my lump sum? I'm thinking that they may not make up the full 25% of my pension, and couldn't afford to reduce my pension further. I'm section C.
You can take a maximum of 25% of your 'total pot value' as tax free cash, but you can take less than 25% if you want to.
If your AVC's equal 25% or less, then you just take the AVC's tax free.
Cheers for the reply. Checked my AVCs this morning. Exactly £21,431 as of this morning. A bit more than I thought tbh. If they stop AVCs it is what it is. Like you, I've been building up a S&S ISA and a SIPP, so a few options when the time comes.