Cancelling the Royal Mail Collective Pension Plan

[norris9]

I am thinking of cancelling my payments into the current Royal Mail pension and instead having that cash go into my bank account to pay off my mortgage quicker....

I've built up a nice little pension in the old RMDCP Scottish Widows Money4Life pension scheme.

As the current Collective Plan hasn't been around that long I think I only have £500 / £600 in it. I googled whether I can cancel the Collective Plan pension and then transfer that ~£600 into my RMDCP pension and it claims I can.

Can anyone confirm this?

[Jaggs]

I am thinking of cancelling my payments into the current Royal Mail pension and instead having that cash go into my bank account to pay off my mortgage quicker....

I've built up a nice little pension in the old RMDCP Scottish Widows Money4Life pension scheme.

As the current Collective Plan hasn't been around that long I think I only have £500 / £600 in it. I googled whether I can cancel the Collective Plan pension and then transfer that ~£600 into my RMDCP pension and it claims I can.

Can anyone confirm this?

Yes you can transfer the pension but do think whether it is best for you in the long term and maybe even go and get independent advice on whether it is best for you.

[RobertT]

1. Have a good read of the info on the RMCPP website and the Handbook in particular. That has all the details you need to know.

2. Each £1 gross pension contribution(the amount on your payslip) is only actually costing you 72p with the taxman paying the rest. The total weekly net figure is how much you'll have in your pocket each week if you opt out.

3. Consider the 13.6 % of pensionable pay RM are also paying in, plus the 1% booster payments, which you won't get by opting out.

4. Login to your account and compare how much you've paid in so far to the transferable value, and what that difference is likely to be going forward.

I'm a bit out of the loop in terms of what people earn, but I think a normal full time postie will have paid in a net of around £850 since the scheme started and I would guess their transfer value could be in the region of £3,000?
Multiple those figures by how ever many years you could be in the scheme and ask yourself what you would prefer.

There's absolutely nothing wrong with using your pension to pay off your mortgage. But from a financial point of view it's likely to be better to take the 'free money' you get from a workplace scheme and transfer when you have enough to pay a big chunk off your mortgage in one go.
With the caveat of it'll still be in a pension so normal pension rules will apply to it, in terms of minimum access age and it's taxable status.

It's obviously a choice you make for yourself and with the help of an IFA if needed, but opting out of a workplace pension scheme is rarely a good financial decision.

[norris9]

1. Have a good read of the info on the RMCPP website and the Handbook in particular. That has all the details you need to know.

2. Each £1 gross pension contribution(the amount on your payslip) is only actually costing you 72p with the taxman paying the rest. The total weekly net figure is how much you'll have in your pocket each week if you opt out.

3. Consider the 13.6 % of pensionable pay RM are also paying in, plus the 1% booster payments, which you won't get by opting out.

4. Login to your account and compare how much you've paid in so far to the transferable value, and what that difference is likely to be going forward.

I'm a bit out of the loop in terms of what people earn, but I think a normal full time postie will have paid in a net of around £850 since the scheme started and I would guess their transfer value could be in the region of £3,000?

There's absolutely nothing wrong with using your pension to pay off your mortgage. But from a financial point of view it's likely to be better to take the 'free money' you get from a workplace scheme and transfer when you have enough to pay a big chunk off your mortgage in one go.
With the caveat of it'll still be in a pension so normal pension rules will apply to it, in terms of minimum access age and it's taxable status.

It's obviously a choice you make for yourself and with the help of an IFA if needed, but opting out of a workplace pension scheme is rarely a good financial decision.

Thanks.

The only sum on my payslip relating to the pension that I can see is -£24.57 per week. This appears under 'payments' below Basic Pay and Delivery Supplement. If I cancel paying into the pension will that £24.57 go into my bank account each week with the tax man taking its share first?

I'd have paid off my mortgage long before I get my pension, so won't be paying any of my mortgage off with actual pension funds.

Overpaying on a mortgage = no interest paid, so big savings, but I understand the pension is more lucrative it's just that you don't get those funds until late in life. For me - I believe it's age 67. I might not even live that long. As I'll be mortgage free well before retirement age I am not too concerned about having a large private pension.

[RobertT]

The only sum on my payslip relating to the pension that I can see is -£24.57 per week. This appears under 'payments' below Basic Pay and Delivery Supplement. If I cancel paying into the pension will that £24.57 go into my bank account each week with the tax man taking its share first?

That is the gross amount you're paying into your pension and constitutes your 6% contribution.
You may not realise it, but you're getting the benefit of tax relief which reduces your income tax bill by 20p in the £, and salary sacrifice which reduces your NIC's by 8p in the £.
Meaning the actual net cost to you is £17.69 per week and that's the extra you'll see in your pocket each week. The taxman is paying the other £6.88.
In effect your contribution is only about 4.3%.

Plus you have the money from RM which is around £55 per week, which you obviously won't get if you opt out.
I believe your death in service benefits would also be less(half as much?), but I'd need to check that.

I'd have paid off my mortgage long before I get my pension, so won't be paying any of my mortgage off with actual pension funds.

Overpaying on a mortgage = no interest paid, so big savings, but I understand the pension is more lucrative it's just that you don't get those funds until late in life. For me - I believe it's age 67. I might not even live that long. As I'll be mortgage free well before retirement age I am not too concerned about having a large private pension.

67 is the normal retirement for your RMCPP benefits, but you can transfer them at any age before that as long as you're no longer an active member of the scheme. You can then access the money anytime after the legal minimum age which is currently 55 and going up to 57 in 2028.
Alternatively you carry on paying in for longer and building up more benefits.

I fully understand the benefits of paying off a mortgage early, and choosing between the two is a balancing act. But what I'm saying is you're likely get more from the pension than you will save in interest on the mortgage, even if it means paying that for longer. So although it's nice to be mortgage free at an earlier age, financially the pension is better overall.

Ideally you should really aim to do both, although I know that's much easier said than done!

Nobody knows how long they're going to live, but the average life expectancy in the UK is in the 80's, so 67 is relatively young compared to that.

I know from personal experience that your financial needs don't go down drastically in retirement, as you still have bills to pay and need to pay for whatever you do to occupy your time. So my advice on that is to have as much cash tucked away as possible, and a pension with it's employer contributions and tax breaks is the best way to achieve that.

Alternatively, you can always look at it as a type of life insurance policy. If you don't use it, you can leave it to your spouse, kids, etc.

[Dexydog]

My two penneth.
I was sceptical of the scheme when it started and came out of it but re-joined.
I was part-time (18 hours) but with bits of overtime, only a little bit in the booster which I did come out of fully stupidly, and when I left in April I received around £1400 into my sipp.
You can't get any payments back you've paid directly if you were employed before a certain date, can't recall when, but quite recently- the only way then to get at it is to transfer it out to a personal pension.
My advice, keep paying in, even if you intend to leave as the benefits will be more than the 6% minus tax you'll get by paying your mortgage off which won't make much of a dent.
5 years of RM paying in 13% and your tax free element will far out perform any extra mortgage interest in that time.
Even if you don't retire early you can still come out of it later on or at age 55 and pay the mortgage then.

[Wullie10]

I don't understand how people moan they are only getting a £17 pay rise but then turn their nose up at the £50 plus RM contribute to their pension fund.

[norris9]

If you are staying with Royal Mail long term then paying into the pension is the no-brainer option.

One thing I don't think I mentioned in this thread is that as it stands I am considering leaving Royal Mail in the near future and therefore considering to cancel the pension so I have more liquid cash now instead of when I am 57+ which is still a long long way off for me.

Further things I have not mentioned about my finances, like how much I have saved, how much equity I have in my house, my age, how much I have invested in my own investment portfolio away from the Royal Mail pension, what type of assets I am invested in, how much money I have as it stands in the Royal Mail pension, how many kids I have or do not have.... these are all factors too.

Anyway, I now need to decide if I am actually leaving Royal Mail, target a leave date, decide whether to cancel the pension or not.

[renrag40]

I am thinking of cancelling my payments into the current Royal Mail pension and instead having that cash go into my bank account to pay off my mortgage quicker....

I've built up a nice little pension in the old RMDCP Scottish Widows Money4Life pension scheme.

As the current Collective Plan hasn't been around that long I think I only have £500 / £600 in it. I googled whether I can cancel the Collective Plan pension and then transfer that ~£600 into my RMDCP pension and it claims I can.

Can anyone confirm this?

If you log into the RMCPP website you can get an up to date indicative transfer value..... as of last week mine was £4992.70.
You won't be able to to transfer it into the RMDCP but you can transfer it into a SIPP.

[Kevin.r.smith]

Why royalmail pay into it its free money you will regret it later in life when it will help

[mrcurve]

I am thinking of cancelling my payments into the current Royal Mail pension and instead having that cash go into my bank account to pay off my mortgage quicker....

I've built up a nice little pension in the old RMDCP Scottish Widows Money4Life pension scheme.

As the current Collective Plan hasn't been around that long I think I only have £500 / £600 in it. I googled whether I can cancel the Collective Plan pension and then transfer that ~£600 into my RMDCP pension and it claims I can.

Can anyone confirm this?

I have seen the "half your age rule" being quoted rather a lot, for example start at 30 you aim for 15%, but you would still have some other pension pots, it might be a challenge to work out how much to save when you restart.

martin lewis website has some useful stuff on pensions so it might be worth a look too,

https://www.moneysavingexpert.com/savin ... -pensions/