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AVC

16 Apr 2017, 15:46

Has there been any official news on what will happen to flexiplan next year?

AVC

16 Apr 2017, 16:06

AVC’s are mentioned in the Q&A’s page in the booklet we all received:

20. I am paying additional contributions to Addplan – what impact does the Company’s proposal have on me?
Under the Company’s proposal, you would not build up any further Addplan pension after 31 March2018. The Addplan pension you have built up would be revalued in line with RPI (up to 5% a year), as is currently the case for active Plan members while you remain employed by Royal Mail or until you take your benefits. Unless you instruct otherwise, your Addplan contributions would continue, but as additional contributions to your DC retirement account instead.

21. I am paying additional contributions to Flexiplan – what impact does the Company’s proposal have on me?
Unless you instruct otherwise, your Flexiplan contributions would continue, but as additional contributions to your DC retirement account instead.

22. I am paying additional contributions to Bonusplan – what impact does the Company’s proposal have on me?
Bonusplan contributions, both yours and the Company’s, would cease on 31 March 2018. However, as DC pensionable pay does not have a Lower Earnings Deduction, both you and the Company would pay contributions on your full basic pay to your DC retirement account.


But as we don't yet know exactly what our pension will look like after April 2018, then things could yet change.

AVC

16 Apr 2017, 16:10

Thankyou Robert.In the new scheme will it still go into a seperate fund to build a lump sum or will it only be used to enhance the pension?

AVC

16 Apr 2017, 16:23

Assuming RM get their way and a DC scheme is introduced, your Flexiplan payments will go into your DC pot along with yours and RM’s regular payments as stated in my post above. You will then be able to do a number of things with that money, within the limits set out by law at the time.

More info on what you can do with your DC pension here: http://www.which.co.uk/money/pensions-a ... se-schemes

AVC

16 Apr 2017, 17:27

RobertT wrote:Assuming RM get their way and a DC scheme is introduced, your Flexiplan payments will go into your DC pot along with yours and RM’s regular payments as stated in my post above. You will then be able to do a number of things with that money, within the limits set out by law at the time.

More info on what you can do with your DC pension here: http://www.which.co.uk/money/pensions-a ... se-schemes


Hi Robert , im currently paying £400 into my AVC in Flexiplan and wish to retire in 4 years time . I had planned on ending my AVC contributions next March at the end of the DB scheme . What do you think would be the better option , still pay into DC AVC or take the contributions and invest into an ISA or something similar instead - Thanks in advance

AVC

16 Apr 2017, 19:24

linntroika wrote:Hi Robert , im currently paying £400 into my AVC in Flexiplan and wish to retire in 4 years time . I had planned on ending my AVC contributions next March at the end of the DB scheme . What do you think would be the better option , still pay into DC AVC or take the contributions and invest into an ISA or something similar instead - Thanks in advance

RM pension contributions give you 2 valuable perks: tax relief(which everyone gets) and National Insurance relief(PSE), which in effect means a £10 gross contribution only actually costs £6.80. So your £400 is only really costing you £272, with the government paying the rest.
If you didn’t know, the amount shown on your payslip is the gross amount and what you pay in income tax and NIC's is being reduced accordingly.

If you were to stop paying your AVC's, not only would you lose those two perks on that money, but your assessable pay would increase and you’d pay more tax too, and you’d have a lot less than £400 extra in your pocket.

DC Pensions are less flexible than other savings vehicles because of various rules attached to them, but with the addition of tax breaks and employer contributions, they are actually a great way to save money.

Personally I see no reason not to continue my AVC’s into the new DC scheme(assuming DB closure) from April 2018, and may increase them!

AVC

17 Apr 2017, 13:59

RobertT wrote:
linntroika wrote:Hi Robert , im currently paying £400 into my AVC in Flexiplan and wish to retire in 4 years time . I had planned on ending my AVC contributions next March at the end of the DB scheme . What do you think would be the better option , still pay into DC AVC or take the contributions and invest into an ISA or something similar instead - Thanks in advance

RM pension contributions give you 2 valuable perks: tax relief(which everyone gets) and National Insurance relief(PSE), which in effect means a £10 gross contribution only actually costs £6.80. So your £400 is only really costing you £272, with the government paying the rest.
If you didn’t know, the amount shown on your payslip is the gross amount and what you pay in income tax and NIC's is being reduced accordingly.

If you were to stop paying your AVC's, not only would you lose those two perks on that money, but your assessable pay would increase and you’d pay more tax too, and you’d have a lot less than £400 extra in your pocket.

DC Pensions are less flexible than other savings vehicles because of various rules attached to them, but with the addition of tax breaks and employer contributions, they are actually a great way to save money.

Personally I see no reason not to continue my AVC’s into the new DC scheme(assuming DB closure) from April 2018, and may increase them!


Many thanks Robert for your valuable advice as always :Very Happy

AVC

20 Apr 2017, 20:59

RobertT wrote:Assuming RM get their way and a DC scheme is introduced, your Flexiplan payments will go into your DC pot along with yours and RM’s regular payments as stated in my post above. You will then be able to do a number of things with that money, within the limits set out by law at the time.

More info on what you can do with your DC pension here: http://www.which.co.uk/money/pensions-a ... se-schemes


Robert, if people were to look at taking their DC pension as a lump sum, is there a figure above which you cannot do that. For some reason I seem to think I read somewhere, that there was a limit of 10k. I could be wrong tho. :hmmmm
Cheers.

AVC

21 Apr 2017, 04:43

heapsy wrote:Robert, if people were to look at taking their DC pension as a lump sum, is there a figure above which you cannot do that. For some reason I seem to think I read somewhere, that there was a limit of 10k. I could be wrong tho. :hmmmm
Cheers.

There is no limit. But as your pension is treated as earned income(after the tax free lump sum), the bigger your pot, the more tax you’re likely to pay. A better option may be to draw down the money over a period of time to reduce any tax liability.

AVC

21 Apr 2017, 20:53

RobertT wrote:
heapsy wrote:Robert, if people were to look at taking their DC pension as a lump sum, is there a figure above which you cannot do that. For some reason I seem to think I read somewhere, that there was a limit of 10k. I could be wrong tho. :hmmmm
Cheers.

There is no limit. But as your pension is treated as earned income(after the tax free lump sum), the bigger your pot, the more tax you’re likely to pay. A better option may be to draw down the money over a period of time to reduce any tax liability.


Cheers for the reply. Will certainly think about that option when the time comes. I've got a few options available to me, due to diversification. Once again thanks.

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