ANNOUNCEMENT : ROYAL MAIL EMPLOYMENT POLICIES (AGREEMENTS) AT A GLANCE (UPDATED 2016)... HERE



Defined Benefit VS Defined Contribution

14 Jul 2017, 13:41

I see from reading the courier news flash the following paragraph
"Don’t forget, we are also giving Plan members a choice. Plan members could join a Defined Contribution scheme instead. We
propose increasing the Company’s contribution to members’ pensions by 1% to 13.6% of pensionable pay. For some members
this could be a better option. It will depend on a range of factors such as your age."

I always thought that DB was better than DC ?, any thoughts or clarification on the above

Defined Benefit VS Defined Contribution

14 Jul 2017, 14:12

We shall have to wait and see exactly what the finer details are, but my understanding is:

The Cash Balance proposal gives us our DB pension up to 31st March 2018, plus an additional pot of money to fund or part fund the tax free lump sum when taking our pensions. Meaning that we won’t have to commute as much or possibly any of our pensions to get a lump sum , which is particularly important for Section C members who don’t get a lump sum as standard.

I assume the Defined Contribution option would be a standalone pension which can be taken independently of the RMPP any time after age 55. You will have the choice what you do with the money under DC pension rules. So you could use it to buy an annuity, take it all out as cash or draw it down over time.
This might be useful to help fund early retirement for example, without having to access your RMPP before normal retirement age/s and face the normal 5% per year reductions.

Personally I’ve been saving into AVC’s for over 20 years and have built up enough to fund my tax free lump sum from those, so I have no need for another ‘cash balance’ to do that for me. Therefore I see a DC plan which has more flexibility, a better option for me. Although most people don't have AVC's, or only have fairly small amounts in them, so in general the guarantees that DB pensions provide are usually the better choice for the majority.

No doubt we’ll be getting another one of those big red booklets in due course giving us all the info.

Defined Benefit VS Defined Contribution

14 Jul 2017, 21:12

Possibly stupid question but could you do both Robert. And would it make sense if you could.

Thanks

Defined Benefit VS Defined Contribution

15 Jul 2017, 04:00

Hawkey99 wrote:Possibly stupid question but could you do both Robert. And would it make sense if you could.

Thanks

It’s one or the other I’m afraid.

Defined Benefit VS Defined Contribution

15 Jul 2017, 17:12

I think I'm leaning towards the DC scheme my pension value on the most recent statement was valued at 120k using 20x rule and I have 22k in AVC's which will be about 25k by the time the plan closes...

I hope to leave at 60 so the AVC will have another 18 years to grow so it will be more than enough for the 25% tax free lump sum and taking the maximum monthly pension!

Then I will put the money previously paid in to my AVC into the DC scheme and if it builds up to a good amount there is the possibility of starting to drawdown before 60 using an amount below my personal allowance so as to minimise tax paid and it maybe a way of getting out a few years earlier whilst leaving the DB money where it is?

Obviously we all need to see more details on the new options but no doubt it will be based on someone on 25k with 2 minutes of their working life left :arrrghhh

Defined Benefit VS Defined Contribution

15 Jul 2017, 17:33

RobertT wrote:
Personally I’ve been saving into AVC’s for over 20 years and have built up enough to fund my tax free lump sum from those, so I have no need for another ‘cash balance’ to do that for me. Therefore I see a DC plan which has more flexibility, a better option for me.


Yes - I'm thinking , at present, the same kind of thing Robert.

What are the investment options with the DC scheme - something similar to those available with Zurich and the AVC's ??

I must say, that in this day and age , there is absolutely no reason for not having access to the full range of financial investments available - like with a SIPP. I know I've mentioned this on here before, but it just strikes me as glaringly obvious. As it stands the options available are severly limited (by the trustees ??) and there is not IMHO a suitable level of transparency (info available regarding performance/commissions/investment strategy/investment timing/charges) nor flexibilty to swap options/trade.

My AVC pot is my money (as will be the DC pot if, God forbid, it comes to that) - and so long as the legislative and/or regulatory rules are followed I should be able to invest that money as I see fit. At the minute I have no financial "sovereignty" or control - and I'll say again, those pension monies are mine - and they are effectively being controlled by someone else (some of whom are making a living off the back of it).

I think this is part the reason that you see so often on these boards the desire to pull out of the scheme altogether by many members - its because people don't feel as if they have control over their own money, and at least by pulling out they feel they would be able to take back control (tax benefits/employer contributions considerations aside).

Whilst its true that some investments are riskier than others its also true that there are strict regulatory controls in the UK re. what can be offered as an investment, in the first place, and strict standards have to be met.

Now that RM are wanting us to take all the financial risk in providing for own future (by doing away with the DB scheme) how can it be reasonably argued that we should have our arms tied behind our backs when doing so ?
It'd be like asking us to prepare a feast - but only providing us with bread, water and drippin with which to make it. Either they prepare the feast themselves using those ingrediants - or give us the full freedom of the kitchen and the pantry shelves.

Defined Benefit VS Defined Contribution

17 Jul 2017, 18:28

jetblack wrote:
RobertT wrote:
Personally I’ve been saving into AVC’s for over 20 years and have built up enough to fund my tax free lump sum from those, so I have no need for another ‘cash balance’ to do that for me. Therefore I see a DC plan which has more flexibility, a better option for me.


Yes - I'm thinking , at present, the same kind of thing Robert.

What are the investment options with the DC scheme - something similar to those available with Zurich and the AVC's ??

I must say, that in this day and age , there is absolutely no reason for not having access to the full range of financial investments available - like with a SIPP. I know I've mentioned this on here before, but it just strikes me as glaringly obvious. As it stands the options available are severly limited (by the trustees ??) and there is not IMHO a suitable level of transparency (info available regarding performance/commissions/investment strategy/investment timing/charges) nor flexibilty to swap options/trade.

My AVC pot is my money (as will be the DC pot if, God forbid, it comes to that) - and so long as the legislative and/or regulatory rules are followed I should be able to invest that money as I see fit. At the minute I have no financial "sovereignty" or control - and I'll say again, those pension monies are mine - and they are effectively being controlled by someone else (some of whom are making a living off the back of it).

I think this is part the reason that you see so often on these boards the desire to pull out of the scheme altogether by many members - its because people don't feel as if they have control over their own money, and at least by pulling out they feel they would be able to take back control (tax benefits/employer contributions considerations aside).

Whilst its true that some investments are riskier than others its also true that there are strict regulatory controls in the UK re. what can be offered as an investment, in the first place, and strict standards have to be met.

Now that RM are wanting us to take all the financial risk in providing for own future (by doing away with the DB scheme) how can it be reasonably argued that we should have our arms tied behind our backs when doing so ?
It'd be like asking us to prepare a feast - but only providing us with bread, water and drippin with which to make it. Either they prepare the feast themselves using those ingrediants - or give us the full freedom of the kitchen and the pantry shelves.


Hi, Jet Black.

You could transfer to a Sipp every 6/12 months or so with RM's Dc pension.I'm using Salary sacrfice to gain 12% uplift the now, with the DB pension and AVC's.Then I'll transfer the Dc and maybe the AVC to Hargreeves Lansdown(min £1000 a time).Their the most expensive for funds but... I'll just be buying 'buy and hold' shares(Unilever,Coca Cola etc) and investment trust and or ETF's.

Zurichs AVC performance https://duckduckgo.com/?q=royal+mail+zu ... 6-1&ia=web

Dodge & Cox appears to have the best peformance out of all the funds you can get on RM'S DC pension.I've checked Lazard emerging markets etc. http://www.moneyobserver.com/funds-in-o ... ernational.
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Defined Benefit VS Defined Contribution

19 Jul 2017, 19:26

BRIBRI wrote:
Hi, Jet Black.

You could transfer to a Sipp every 6/12 months or so with RM's Dc pension.I'm using Salary sacrfice to gain 12% uplift the now, with the DB pension and AVC's.Then I'll transfer the Dc and maybe the AVC to Hargreeves Lansdown(min £1000 a time).Their the most expensive for funds but... I'll just be buying 'buy and hold' shares(Unilever,Coca Cola etc) and investment trust and or ETF's.

Zurichs AVC performance https://duckduckgo.com/?q=royal+mail+zu ... 6-1&ia=web

Dodge & Cox appears to have the best peformance out of all the funds you can get on RM'S DC pension.I've checked Lazard emerging markets etc. http://www.moneyobserver.com/funds-in-o ... ernational.


Very interesting - I didn't know you could do that with the DC scheme.

Thanks for posting.

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