New Collective Pension Plan Questions

[Stef]

I contacted the New Collective Pension Plan helpline with some questions.
Let me give you a brief summary about myself. I am 57 years old and plan to retire in 3 years time at age 60, so I will only be contributing into the new Pension for 3 years.
The questions I asked them are,
Q1/ Can I retire at 60 and leave the new collective pension plan until I reach the age of 63 before I take it? – Answer - yes this is possible

Q2/ could I only take the A.V.C part at age 63 and leave the Income for Life and Guaranteed lump sum parts until I reach 67 years old? –
Answer - no the AVC’s are a addition to the income for life and can not be taken separately, you would be able however to transfer the AVC’s out to another provider

Q3/ Concerning the A.V.C part of the new pension can this definitely be taken as a cash lump sum? – Answer - This can only be taken as a cash lump sum along side taking your income for life pension.

They also highlighted if the benefits are taken before 67 they will be reduced. Please see below.

The normal age for taking your benefits is 67 but you can take them earlier if you want to. If you take them before you're 67 they're reduced for early payment.

The most important answer I got was concerning the A.V.C's I build up over the next 3 years. It is really important to me that when I decide to take all my 67 benefits that the A.V.C's part is a Cash lump sum. With this being confirmed I am more than happy to pay A.V.C's into the new Collective Pension Plan. I also plan to pay the additional 1% to the Lump Sum Booster.
Hope these answers I received can help others.

[david3595]

Thanks for the info, I only plan to be in new CDC for 4 years and leave at 63. Being able to take AVC’s as a cash lump sum is welcome news

[heapsy]

Stef, did they tell you what the reduction for early payment was?

[vmaxv4]

Stef, did they tell you what the reduction for early payment was?

Something clearly absent in any of the literature I’ve read even the technical q&a’s.

[Stef]

Hi Heapsy no mate they didn't mention any percentage deduction for early payment. I can only presume it's the usual 5% deduction per year that you take it early, sorry i don't have any definite answer.

[vmaxv4]

Page 73 of the Handbook states that Royal Mail & Trustees have the right to refuse early payment before 67.

[Wullie10]

Page 73 of the Handbook states that Royal Mail & Trustees have the right to refuse early payment before 67.

Now getting to the nitty gritty. Most talk on the pension forum has been about taking pensions early. I have no intention of going beyond 65.

[Stef]

Ye I noticed that when I read a wee bit of the handbook that they had the right to refuse early payment. It would be a right kick in the Ging Gangs if they did refuse you. You would think that by receiving it reduced was enough of a penalty. Fingers crossed nobody ever gets refused. Maybe it's Royal Mails way of saying " I'm the daddy"

[RobertT]

The RMPP guide to benefits says something similar!
Considering there's a legal minimum access age for pensions, it sounds like a technicality to me.

There's a section about taking your pension before the NRA of 67 in the RMCPP Trust Deed(page 54).
Basically it says a pension paid early should cost the scheme the same amount as it would do if it's paid at 67.

As the average person gets more NRA60/65 benefits overall when taken at NRA compared to earlier, it suggests to me the RMCPP system is fairer and the pension will see a lower reduction if taken early. Perhaps more like 4%?

[heapsy]

Ye I noticed that when I read a wee bit of the handbook that they had the right to refuse early payment. It would be a right kick in the Ging Gangs if they did refuse you. You would think that by receiving it reduced was enough of a penalty. Fingers crossed nobody ever gets refused. Maybe it's Royal Mails way of saying " I'm the daddy"

I think that is aimed at those of us who are in our mid/late 50's. They wont want a sudden, unexpected rush on the new pension before it gets going properly. In most cases we will have done 30+ years and are probably beginning to struggle physically. Coupled with the fact that our pension age will have been move by 7 years, in two stages, by the time this comes in, It wouldn't surprise me if many jump ship. One of ours is now training to be a tram driver, having done 22 years, and he's 52.

[Stef]

I've just sent a question to the Pension Transition team asking them what the percentage reduction is for taking the New Pension early. As soon as they reply I will post on here.

[Stef]

Still no reply from the Pension Transition team concerning what the percentage reduction is for taking the new pension early. Previously when i have sent them a question they have replied within 24 hours. Fingers crossed they reply soon.

[Jefferson Starfish]

Still no reply from the Pension Transition team concerning what the percentage reduction is for taking the new pension early. Previously when i have sent them a question they have replied within 24 hours. Fingers crossed they reply soon.

Could be because there isn't a set percentage reduction, as suggested by Robert in another thread?

viewtopic.php?f=27&t=113501

[Stef]

Thanks for your reply Jefferson Starfish, that is interesting what Robert T says. If it does turns out to be an average 4% per year deduction that would be reasonable

[Stef]

I finally received a reply from the new pension transition team. I asked what the percentage reduction is for each year you take the New pension and lump sums and AVC early. I am planning on retiring at 60 and waiting until 63 before taking the new pension.This is their reply,
Thank you for your email,



We do not know by what percentage the income for life / lump sum / lump sum booster will be reduced as the actuarial factors are reviewed and updated regularly and it will depend what factors are in place on your 63rd birthday. Once the Collective Plan has launched, you will be able to get an estimate via the Pension Service Centre. For AVCs, you get the value of the AVC pot on the day it's paid across, it's not "reduced", you just have less time to pay into it and less potential to get investment returns (though not guaranteed it'll go up if you leave it longer).