DBCBS- what's the catch?

[Dexydog]

So I got another booklet through inviting me to join the above scheme.
Currently in RMC or whatever the acronym is.
Now the new one says RM pay in 13.6 on top of your 6%, better than currently.
Booklet doesn't say how or where it is invested, only that any risk is split between you and RM (yeah, right).
Also mentions pensionable pay is different to old scheme, again doesn't say in what way??
Finally, looks like if you take before 65 you might get less, or at least miss out on any "bonus"- again, ambiguous at beat over what or how you get any.
I'm naturally suspicious, am I right to be?
Should I stick with my current plan (which is currently taking a paggering due to Putin's exploits).
Seems to me the union has again agreed to something with little or no detail.

[RobertT]

So I got another booklet through inviting me to join the above scheme.
Currently in RMC or whatever the acronym is.

An offer to join the DBCBS instead of the RMDCP?

Now the new one says RM pay in 13.6 on top of your 6%, better than currently.

You'll be in section F of the RMPP, meaning you have the Lower Earnings Deduction taken from your pay to get pensionable pay.

Booklet doesn't say how or where it is invested, only that any risk is split between you and RM (yeah, right).

See the RMPP report and accounts to see investments.

Also mentions pensionable pay is different to old scheme, again doesn't say in what way??

See above.

Finally, looks like if you take before 65 you might get less, or at least miss out on any "bonus"- again, ambiguous at beat over what or how you get any.

The info says it will be reduced if taken before NRA of 65.

I'm naturally suspicious, am I right to be?
Should I stick with my current plan (which is currently taking a paggering due to Putin's exploits).
Seems to me the union has again agreed to something with little or no detail.

The DBCBS was agreed 4 years ago as part of the 4 Pillars agreement, which will see the new CDC scheme replace the existing schemes at some point in the not too distant future – probably the back end of 2022 or early 2023.

More details on the DBCBS can be found on the RMPP website. For those in your position with the option to join the DBCBS instead of the RMDCP, just choose section F on this page: https://www.royalmailpensionplan.co.uk/

[Dexydog]

Thanks for reply Robert.
Yes, DBCBS.
There were 4 or 5 acronyms on first page of booklet which I've now filed away.
No links like you have provided, very little actual detail.
My current scheme, as has been subject to an earlier thread, looks like it doesn't offer drawdown according to someone who had just tried ( section F seems to imply otherwise).
In all honesty for the layman the whole thing is absurd that you expected to make an important life decision based on this booklet.
Looks good, but I can see potential problems if I'm reading correctly.
Honestly find it impossible to make an informed decision.
Why has it been changed, again, and what are the benefits/ pitfalls compared to one I'm in now?
I find pensions in general make my brain hurt.
Appreciate it might benefit some, but not others- the question is, who and in what circumstances?
For reference I'm 56 with only a small pot in other scheme, was hoping to retire this year but events have conspired against this so now looking at leaving at 60.

[yellowbelly]

I had this same choice but didn't take it because of the short time scale between taking it out and the
(alleged) implementation of the new CDC. I didn't want a small DBCBS pot which I would have to cease
making contributions to when CDC comes in and possibly charges eating away at the
money in it (didn't investigate this too deeply though).

Also didn't fancy having another small pension pot to deal with administrative wise.

Preferred just to keep building up RMDCP with AVC's until CDC comes in. Whether this will be the
right decision financially - only the future will tell. Everyone has to do their research and make their
own choice.

[Dexydog]

My gut feeling is to leave as is.
RM may on the face of it be paying a little more in, but the cost of that must be borne somewhere, right?
I take your point about doing research etc, but I just don't feel there's enough out there to make an informed decision.
I've been trawling most of day and honestly can't find the info I would need to do this.
Seems to me they just expect you to change, which rings alarm bells with me.

[RobertT]

Neither the RMDCP or the DBCBS offer drawdown directly, you would have to transfer out to another provider in both cases.

For section F members, the DBCBS is basically a DC scheme just like the RMDCP. Except the main differences are:

How pensionable pay is worked out.
The DBCBS has an NRA of 65(reduced if taken before), rather than minimum access age of 55 with the RMDCP.
The DBCBS contributions going in are guaranteed, as are annual bonuses once they're added.
The RMDCP is subject to your investment choices and so your money will fluctuate with the markets.

It'll always depend on the individual. But if I was in the same position, I think I would stick with the flexibility of the RMDCP. But everyone will be different.

[Dexydog]

Having read a little more and kind of understanding the gist slightly more, I will leave as I I think.
The pensionable pay differences I really don't get- the glossary in booklet mentions an LED deduction applies with DBCBS, no explanation whatsoever other than in glossary so is this a good or bad thing??
I assume its linked to how it affects take home pay as there are tables for both schemes- again it's useless as it also says you can't directly compare the 2- aaargh!!
PSE- I am thinking this applies to RMDCP but not RMDCP but not DBCBS but again no actual info just a mention, so that's just a gut feeling.
Again, how on God's earth can anyone make an informed decision here??
Pensionable allowances and bonuses included but won't affect me as I don't get any.
Indexation "up to" 5%, could therefore be zero??
Drawdown- not getting this- so you can take 25% but then you have to leave the rest unless you move it to another pot??
In my case the remaining will buy an annuity of about 50p a week so that's not going to work.
To move the pot I assume charges at both ends?- how much are these likely to be?
Thanks for the patience and help- I had a phone appointment with pensionwise the other week and quite honestly they're so scared of telling you the wrong thing their stock answer to any question was to pay for advice.
Small pot so paying for advice or facing charges re drawdown are not attractive, especially given if I do transfer into DBCBS there'll be a tiny amount in at 60 and I'll have to leave it till 65, still be peanuts in there so is it best to leave in one pot anyway?

[Schiff]

I also found the lack of detail pretty alarming when faced with this choice. I eventually managed to get hold of the scheme rules which provided a lot of the missing detail.

I decided to move to the DBCBS. It was right or my particular circumstances. Others will be different.

One thing that I couldn't find out is what, if any, reduction is made for taking this pot before age 65 but from others who have retired early any reduction is absolutely minimal and shouldn't really have any bearing on the decision.

I have attached the scheme rules if they are of any help to anyone else.

[Dexydog]

Won't download for me.
Are these the same ones Robert linked earlier?
As I understand it there's no way of knowing how taking this pot early affects what you get as no-one has yet lol.
It implies your pot is guaranteed yet at same time seems to suggest taking early it might not.
Either way to get at it you have to transfer it to a drawdown scheme (as Robert pointed out).
However, this scheme is purely to give you a cash lump sum is it not, so why on earth should you have to start faffing about moving it, and no doubt paying charges, just to get at it when the time comes?

[RobertT]

The full scheme rules are to be found via my earlier link, in the 'media library'.

The DBCBS means slightly different things depending which section of the RMPP you're in. If it's sections A, B or C, it's designed to fund the tax free cash when taking already accrued NRA60/65 benefits.
But if you're in section F it's very similar to a DC scheme. So you can take 25% tax free with the rest as taxable cash directly from the DBCBS, or else transfer it all out for an annuity or drawdown.

Transferring and drawing it down over a longer period may well be the better choice from a tax point of view, depending on the individual.

PSE applies to all RM pension arrangements as long as you stick within the limits.

The DBCBS gives a higher percentage contribution from RM, albeit from potentially a lower pensionable pay amount. Unless you can get an answer from the Pension Service Centre in Sheffield, ultimately it's up to you to work out the difference in money terms

The annual bonuses are discretionary and are a max of CPI + 4%.
I'm not 100% sure which months CPI figures they use. It's usually the previous September for RM pensions, but can't find any mention of that for the DBCBS.
CPI is 5.5% at the moment(January 2022), so the max would currently be 9.5%. Or 7.1% based on September 2021 figures.
Once the bonuses are added, they're guaranteed.

This years increase amount is due to be released in the next few weeks and will be applied from 31st March.

It would be possible to transfer from the DBCBS to a DC scheme, but not the other way.

If you wanted your RMDCP and DBCBS in one pot to drawdown as one, you would have to transfer both to another provider.

[Dexydog]

Thanks Robert.
Having the scheme rules ad understanding them are 2 completely different things!
Confused now, as you say with the new scheme you can 25% tax free and the rest is taxable, but in the next sentence "or else transfer it all out for an annuity or drawdown"- I thought drawdown was exactly that, so how could you take the money out as you describe but not put it into a drawdown vehicle first??
Complete dark art- if you understand all this you're in the wrong job my friend.
Again many thanks for trying to explain, it's much appreciated.

[RobertT]

You have 2 options with section F:

1. Take all of your money out of the DBCBS in one go, with 25% being tax free and the remainder being classed as income and taxed under normal PAYE rules.

2. Transfer all of your DBCBS cash (and your RMDCP too?) to a DC scheme and then put that new scheme into drawdown, or buy an annuity.

Drawdown from a DC pension means taking the first 25% tax free and then accessing the remaining 75% over time as and when you want. In practice there will be a certain number of withdrawals allowed each year, depending on the provider.

By accessing the 75% over time, rather than in one go, you're likely to pay less tax. Although that will depend on what other income you have.

Another option with DC is the UFPLS route, which is similar to drawdown, except 25% of each withdrawal is tax free.

The tax rules with pensions are exactly the same as with wages. Basically any income over the Personal Tax Allowance(currently £12,570 per year) is taxable.