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2018 Pension Review Q&As

05 Jan 2017, 07:39

https://www.myroyalmail.com/2018%20Pens ... w%20Q%26As

During the 2018 Pension Review consultation, we will be updating the below Questions and Answers.

If you have a question about the proposal not answered here, you can call the Pensions Consultation Helpline on 0345 850 0081. Lines are open Monday-Friday, 8.30am-5pm, not including bank holidays.

1. What does this mean for me?

Remember that we remain committed to not making any changes before April 2018 (subject to the conditions we told you about in 2013). Apart from the change to the Final Salary pensionable pay link for Section C members’ pre-April 2008 benefits, we are not proposing to change the benefits you build up before April 2018, or your benefits transferred to the Government in 2012. If you’re close to retirement, we expect that our proposed changes would have a smaller effect.

There are illustrations at the back of the consultation booklet. They illustrate the possible effect (based on the assumptions listed in Section 2 of the booklet) of the Company’s proposed changes on the retirement benefits of members with a range of different ages, pensionable pay and service levels. These should help you to understand how the proposed changes might affect you (if the relevant assumptions turn out to be correct).

During the consultation process, you will receive a personal illustration based on your own individual circumstances showing the possible impact of the proposed changes on you, if they were to be implemented. The illustration is subject to certain important assumptions stated in the illustration, which may or may not turn out to be correct.

We believe our proposal, if implemented, offers a very competitive pension package compared to our industry and other large employers.

2. How does this affect my Final Salary benefits?

Under our proposal, Final Salary benefits built up by Section B members before April 2008 would continue to be linked to your Final Salary pensionable pay (while you remain employed by Royal Mail or until you take your benefits). For Section C members, this link would stop in April 2018 and Final Salary benefits would revalue thereafter in line with RPI (up to 5% a year) while you remain employed by Royal Mail or until you take your benefits.

3. How does this affect my Career Salary Defined Benefits?

You would not build up any further Career Salary Defined Benefits (CSDB) after March 2018. Your accrued benefits would, after 31 March 2018, continue to be revalued in the future in line with RPI (up to 5% a year) while you remain employed by Royal Mail or until you take your benefits. For Section B members, 2010 to 2012 CSDB blocks would also be linked to changes in Final Salary pensionable pay (if better than RPI) while you remain employed by Royal Mail or until you take your benefits.

4. How would this affect my benefits in the Royal Mail Statutory Pension Scheme (RMSPS)?

Our proposal would make no changes to your RMSPS benefits. See page 8 of the consultation booklet for more information.

5. Why is this change necessary?

The work that has been done on the Plan’s 2015 financial review indicates that from April 2018, the Company’s contributions would more than double from around £400 million a year to over £1 billion a year - if members then continue to build up benefits on the current basis. This increase would not be affordable. It is significantly more than the cash we generate each year – around £290 million in 2015-16. If we had to make this level of contributions, we could not invest to grow and provide good quality jobs for the future. It would reverse the benefits for you and the Company of the previous actions we have taken. Those actions helped to make you pension more secure, improved the viability of your Company and enhanced your future job security. So we need to decide now what form your pension benefits will take after March 2018 so that we can avoid this unaffordable increase in contributions.

6. Is the Plan invested in the right assets?

For many years, financial markets conditions for many pension schemes - like our Plan – have not been favourable. This was why we needed to introduce the Pensions Reform in 2014. Since then, financial conditions have significantly worsened and recent improvements have not materially changed that position. Financial markets are where the Plan holds, buys and sells the investments that it uses to pay member benefits. These include investments such as Company shares and Government or corporate bonds. The yields on bonds and expected future returns on other investments are used to calculate the money that should be set aside now to pay benefits in the future. In recent years, pension costs have increased due to the historically low yields on bonds and lower long-term expected returns on other assets.

Taking into consideration these worsening financial market conditions, the Plan’s investment performance has been good. However, the yields on bonds and returns on other assets are so low that the resulting increase in contributions payable by the Company means unfortunately this is not enough to prevent further changes being needed.

Many companies have already closed their Defined Benefit pension schemes in recent years. Only a few FTSE 100 companies still have a significant number of their employees in a Defined Benefit Scheme.

7. Is this just about the Company saving money?

No. It is about avoiding an unaffordable increase in contributions after March 2018. The Company expects to pay broadly the same in pension contributions and National Insurance contributions in 2018-19 (when the proposal would take effect) as it did in 2015-16 (before National Insurance contributions increased as a result of the Government’s changes to the State Pension – see question 8).

In these circumstances we believe that our proposal would be a fair outcome for members. If the proposal is implemented, the Company believes that it would:

be a very competitive pension package compared to our industry and other large employers;
help us to meet our objective of helping to protect the pension benefits you have built up;
provide more sustainable pension arrangements in the future; and
help us to continue to provide as many good quality jobs as possible.
The Company believes that this proposal is the best option available in the circumstances. But we will, of course, actively consider any other affordable proposals that members or their representatives wish to put forward during the pension review process.

8. What impact has the end of contracting-out had on the Company?

The Government’s introduction of a new, single tier State Pension in April 2016 brought an end to contracting-out for the members of many UK Defined Benefit pension schemes, including Plan members.

This has resulted in the Company having to pay around an extra £65 million in National Insurance contributions every year. As part of the Pensions Reform introduced in 2014, the Company confirmed that it would take on this additional cost without changing Plan benefits. This commitment expires at the end of March 2018.

9. Is my individual consent – or that of my union - required for the Company to implement the proposal?

No. The Company is required to consult its employees. Ultimately, the Company does not need individual member consent, or that of the unions, to implement this proposal. However, we want to hear your views.

We will consider the consultation responses and discuss them with our unions as part of our pension review process. We know how important your pension benefits are to you.

10. Why doesn’t the Company just pay the extra?

If nothing changed, from April 2018 the Company would need to pay over £1 billion a year to fund members’ pension benefits. This would increase the Company’s contributions from around 17 per cent of pensionable pay to over 50 per cent. As such, the level of contributions would not be affordable. It would reverse the benefits for you and the Company of the previous actions taken. Those actions helped to make your pension more secure, improved the viability of your Company and enhanced your future job security.

11. How do I know that my views will be taken seriously?

We want to hear from you. Although the consultation is not binding, we take the views expressed by our colleagues and their representatives seriously.

12. Can you ensure my pension is safe?

Through the pension transfer, the Government has taken legal responsibility for the benefits you built up in the Plan until 31 March 2012. There would be no changes to the benefits you would receive from the RMSPS as a result of the Company’s proposal.

The benefits you have built up in the Plan since April 2012 are currently well funded. But, we expect the current surplus will run out in 2018. To address this issue, we now need to move to the member-wide consultation phase of our pension review process. See the table on page 8 of the consultation booklet for more information on where your benefits would come from if the proposal went ahead.

13. How much would I pay under the Company’s proposal?

If you do nothing, you would continue to contribute 6% of your pensionable pay to your pension, as you currently do (or we pay the equivalent amount under Pension Salary Exchange (PSE)). But please see question 14 for how we propose to calculate pensionable pay after March 2018. Under our proposal, you could choose how much of your pensionable pay to contribute into your pension – 4%, 5% or 6%, with the Company contributing 7%, 8% or 10%, respectively.

14. How would pensionable pay be calculated if the proposal is implemented?

Currently, pensionable pay is made up of basic pay plus, in some cases, pensionable allowances and pensionable bonuses. Section C members – who make up the majority of Plan members – then have £3,328 deducted (the Lower Earnings Deduction) every year. Under our Defined Contribution proposal the Lower Earnings Deduction would not be made when calculating pensionable pay. However, allowances and bonuses would not count towards Defined Contribution pensionable pay under our proposal.

Overall, we expect the majority of members would have higher pensionable pay under our DC proposal.

15. What happens if I am promoted after 31 March 2018 under the Company’s proposal?

Promotional pay increases after 31 March 2018 would not flow through to the DB benefits you have built up under the Plan (subject to certain exceptions for Section B members). However, they would immediately flow through to your DC pensionable pay. Both you and the Company would pay more contributions into your retirement account if your pensionable pay increased.

16. I am in a grade where I get increments – what happens to them under the Company’s proposal?

Incremental pay increases after 31 March 2018 would not flow through to the DB benefits you have built up under the Plan (subject to certain exceptions for Section B members). However, they would immediately flow through to your DC pensionable pay. Both you and the Company would pay more contributions into your retirement account if your pensionable pay increased.

17. Some of my allowances are pensionable – will I still earn pension on them under the Company’s proposal?

After 31 March 2018, allowances would not flow through to the DB benefits you have built up under the Plan (subject to certain exceptions for Section B members). Allowances are not included in DC pensionable pay. Please see the glossary on page 41 of the consultation booklet for the definition of DC pensionable pay.

18. My bonus is pensionable - would I still earn pension for my bonus under the Company’s proposal?

After 31 March 2018, bonuses would not flow through to the DB benefits you have built up under the Plan. Bonuses are not included in DC pensionable pay.

19. I have taken flexible retirement – what impact does the Company’s proposal have on me?

There would be no change to the pension you are already receiving. If you are still building up further Career Salary Defined Benefit pension that would cease on 31 March 2018 and those benefits 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.

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 March 2018. 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.

23. What happens if I am made redundant – what impact does the Company’s proposal have on me?

The Company’s proposal is that only cash compensation would be payable from 1 April 2018. However, we would have separate discussions with our unions about the impact of the proposed changes where redundancy arrangements are governed by collective agreements before making any final decision.

24. What happens if I am a Section A member?

The Company’s proposal would not impact you unless you opt for Section B benefits. There are very few active Section A members left in the Plan.

25. Would my pension be safer if I take it early?

As the Company’s proposal would only affect the build-up of future pension benefits, there is no advantage in taking your pension early to avoid any changes brought about by the proposal. In fact, taking your pension benefits early could disadvantage you in the future by reducing your ability to build up additional pension benefits.

Under our proposal, we remain committed to not making any changes before April 2018, subject to certain conditions. You would continue to build up benefits as you do now until 31 March 2018. No changes would come into effect before April 2018.

If our proposal was implemented, it would be a very competitive pension package compared to our industry and other large employers. The Company would continue to make a significant contribution to your pension.

Important legal note: this website, the consultation letter and its enclosures are for consultation purposes only and do not guarantee or change your benefits. Benefits under the Royal Mail Pension Plan are subject always to the rules of the Plan in force from time to time. Once we have considered the responses to the consultation and had an opportunity to discuss matters further with our unions as part of our pension review process, we will write to you with our decision and the full terms of any changes. We have the right to withdraw, suspend or amend any part of any Royal Mail pension arrangement, including Pension Salary Exchange (PSE), at any time.

2018 Pension Review Q&As

05 Jan 2017, 17:09

Not many ifs and buts there then!

2018 Pension Review Q&As

05 Jan 2017, 23:28

The Company is required to consult its employees. translation: It's a pain, but we're legally obliged to pretend you'll have a choice of whether this is implemented

Ultimately, the Company does not need individual member consent, or that of the unions, to implement this proposal. translation: we'll be implementing this change

However, we want to hear your views. translation: we like to have a chuckle, in the boardroom

2018 Pension Review Q&As

09 Jan 2017, 17:25

wandle wrote:The Company is required to consult its employees. translation: It's a pain, but we're legally obliged to pretend you'll have a choice of whether this is implemented

Ultimately, the Company does not need individual member consent, or that of the unions, to implement this proposal. translation: we'll be implementing this change

However, we want to hear your views. translation: we like to have a chuckle, in the boardroom

They we be chuckling when we vote for action in a few months time.

2018 Pension Review Q&As

12 Jan 2017, 06:21

Additional Q&As from the helpline: https://www.myroyalmail.com/node/9590

1. How would the Company’s proposal impact my current pension benefits?

Members’ benefits are made up of the following:

Pension benefits built up until 31 March 2012: these are held in a Government scheme called the Royal Mail Statutory Pension Scheme. The Government is legally responsible for these benefits and they are increased in line with RPI (up to 5% a year) until you take them or leave Royal Mail employment. There would be no change to these benefits. Our proposal relates to the way you would build up benefits in future, after 31 March 2018.

Pension benefits built up between 1 April 2012 and 31 March 2018: under the proposal, you would continue to build up benefits as you do now until 31 March 2018.

After this date, Section C members’ pre-April 2008 benefits would be linked to increases in RPI (up to 5% a year) from 1 April 2018 until they leave Royal Mail employment or take their benefits, rather than to Final Salary pensionable pay at the date they leave.

Section A/B members’ pre-April 2008 benefits would continue to be linked to the greater of:
- increases in RPI (up to 5% a year) and;
- Final Salary pensionable pay at the date they leave.

The Final Salary link is required under the Section A/B rules in order to maintain increases at RPI (up to 5% a year) in the Royal Mail Statutory Pension Scheme. This is not a requirement under the Section C rules.

For more details on how Final Salary pensionable pay is calculated, please see the decision booklet on the 2014 pension changes.

2. Am I in Section A/B or C of the Plan?

Check your payslip or your last Benefit Illustration from the Plan Trustee to find out which Section of the Plan you are in. You will also be receiving a personal illustration that shows this information.

3. What is the difference between a defined benefit and defined contribution pension?

The main difference between defined benefit (DB) and defined contribution (DC) pension schemes is how certain you can be about the amount of benefit you will get when you retire.

In a DB scheme, there is one pot of assets out of which all scheme members’ benefits are paid. Benefits are usually based on a formula using pensionable pay, pensionable service, and the rate at which you build up benefits. The amount you receive when you retire does not depend on investment returns. It is the Company that has the responsibility to ensure that the contributions paid into the scheme, along with the investment returns, are sufficient to pay all of the benefits.

In a DC scheme, each member has their own individual retirement account. Contributions from both the employee and the Company are paid into the retirement account. They are invested in order to grow. The amount you receive when you retire depends to a certain extent on the returns of these investments, as well as on charges levied. Benefits depend on the size of your retirement account when you retire as well as the cost of the options chosen at retirement. There is no guaranteed amount.

4. Why are you including State pension in the illustrations?

Since April 2016, you and the Company have been paying increased National Insurance Contributions following the ending of contracting out and you are now fully participating in the new State Pension Scheme. Prior to April 2016, you were having part of your State pension provided by the Plan, but you are now potentially earning additional State pension benefits on top of your Royal Mail Pension Plan benefits. Hence, it makes sense to show the impact of the proposal on your total pension provision including your estimated State pension. We have also provided an estimate without the State pension so that you can see the changes to your Plan benefits.

5. How would my death in service benefits be affected by the changes?

The overall death in service lump sum would remain as 4 x pensionable pay, but would be based on your DC pensionable pay. There would be an additional death in service lump sum of 2 x DC pensionable pay payable to your dependants together with the value of your retirement account, plus there would be additional death benefits for your dependants based on your Plan service and pension benefits earned to 31 March 2018.

6. What will happen to my current Flexiplan and Bonusplan funds with Zurich that have built up?

The AVCs (Additional Voluntary Contributions) you have paid to the date of any changes will not be affected and you will still be able to invest your funds in whatever way you wish in the available investment funds. Page 15 of the Consultation booklet shows three questions on AVCs.

You would be able to choose how the money in your Defined Contribution retirement account is invested. There would be a range of funds to choose from, in a similiar way as currently available for Flexiplan and Bonusplan. If the proposal went ahead, full details of the investment options available to you would be provided closer to the time when you could make a decision.

Under the proposal, members could pay more than 6% as AVCs to the Defined Contribution retirement account (in practice up to a maximum of around 80% of pay), but the maximum paid by the Company (if the employee pays more than 6%) would be limited to 10%.

7. What happens if I am made redundant – what impact does the Company’s proposal have on me?

The current redundancy arrangements will remain in place until 31 March 2018. The Company’s proposal is that only cash compensation would be payable from 1 April 2018. However, we would have separate discussions with our unions about the impact of the proposed changes where redundancy arrangements are governed by collective agreements before making any final decision.

8. Can I get my money out of the Plan now?

If you are aged 55 or over, you can take benefits early under flexible retirement. As an alternative you can take a transfer from the Plan to a private arrangement.

Taking your current pension benefits early will reduce your future potential pension benefits. As the proposal would only affect the build-up of future pension benefits, there is no advantage in taking your pension early to avoid any changes brought about by the proposal. In fact, taking your pension benefits early could disadvantage you in the future by reducing your ability to build up additional pension benefits.

Please note that no-one at the Company can give you financial advice, but it is strongly suggested that if you are considering taking all your benefits early from the Plan that you seek professional independent financial advice first.

You should take professional independent financial advice if you are considering transferring your benefits under either arrangement. Please take care when selecting a new provider because there is an increasing number of fraud cases associated with pension transfers, see below:
http://www.pensionsadvisoryservice.org. ... tion-plans

9. Are all the changes being made because the Company took a pension “holiday” in the late 1990s?

No. The pension transfer to the Royal Mail Statutory Pension Scheme (RMSPS) in April 2012 relieved the Company of its historic pension liabilities so this has no bearing on the current issue which is about the future cost of your pension.

2018 Pension Review Q&As

12 Jan 2017, 08:48

Im a Section C member. Im 29 now and started in Oct 2007. Am I in the DB scheme or the DC scheme or both? Very confused.

2018 Pension Review Q&As

12 Jan 2017, 23:31

Sections A, B and C all relate to the defined benefit (DB) scheme which is called RMPP (although the pre-2012 part that the government are responsible for is now called RMSPS). The DB scheme closed to new members in 2008 so you just made it in time. If you had started after the closure date, you would have been in the defined contribution (DC) scheme which is called RMDCP

2018 Pension Review Q&As

13 Jun 2018, 17:47

I didn’t know where to post this just hoping someone might see it .At the moment I’m paying £31 into a pension what might occur, so my money
is just staying dormant somewhere .Havent had any updates yet I wonder when we will here as that a lot of the postie money staying dormant

2018 Pension Review Q&As

13 Jun 2018, 17:57

tmac wrote:I didn’t know where to post this just hoping someone might see it .At the moment I’m paying £31 into a pension what might occur, so my money
is just staying dormant somewhere .Havent had any updates yet I wonder when we will here as that a lot of the postie money staying dormant

Which RM pension are you paying into?

If your in the RMDCP then you should be able to log into your online account to see how its performing.

Or are you paying into the DBCBS? In which case that is a 'DB pot' with a total of 19.6% of your pensionable pay going in, with your share being 6%. It may or may not benefit from a %age bonus once it's been in operation for 12 months. It only started in April!
I suspect we won't get to here how much our individual pots are worth until we get next years(2019) annual statement.

AVCs and what you can with them

18 Jun 2019, 19:32

Hi everyone,
This is my first time on RMchat and the big question that I have is about AVCs. I have read some of the posts trying to understand about AVcs and what I should do with mine. This time last year I phoned Rm pension and was told that I could cash in my avc and was told wait till now and call them. I made the call, but when I asked about cashing in the avc was told its attached to my pension and cant just cash in the avc without takin part of my pension. When I asked how much the avc is worth they wont tell me until I take part of my pension. So is this right or can do what I want with it, I wanted to take the avc money and invest somewhere else. RM pension have had this avc for 19 years and its made no interest in fact they are trying to say its worth a little less than when I put it in. So all I want to know is what can I do with the avc, Any help be gratefully appreciated.

Locker1

2018 Pension Review Q&As

19 Jun 2019, 03:28

The normal use of AVC's is to fund some or all of the tax free lump sum when taking your main NRA60 & NRA65 benefits. However you do have the option to transfer out your AVC cash separately into another pension scheme. That's covered in this thread.

You can't just take the money direct from your AVC without taking your benefits – you have to transfer it!. So the PSC are correct in what they say!
But beware if you then want to access all of it, you have to be age 55+ and only 25% is guaranteed to be tax free with the rest being classed as income. More info here.

I assume your AVC is invested via Zurich?
In which case you should have online access to your account and be able to check the balance.
Or else it's with one of the 'legacy' with profits fund providers Equitable Life, Standard Life or Aviva?

I can't comment on the performance without knowing where your money has been for the last 19 years. But personally I've been paying AVC's for about 25 years and the investments have done very well over that time.

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