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Pension section A/B v Section C

21 Nov 2017, 09:23

I have often wondered this as I joined section C as I apparently joined a few months after section A and B was closed to new entrants.

Now my question is this which is better and why ?


Pension section A/B v Section C

21 Nov 2017, 10:03

Here’s some key points of each scheme(I haven’t included Section A because that closed in 1971 and there’s only a very small number of members, if any, still employed) :

Section B

Pluses:

All basic pay(plus some allowances) is pensionable.
A lump sum as standard equal to 3 times pension.
The ability to give up some or all of the lump sum for more guaranteed pension.

Minuses:

Final salary element accrues at the rate of 1/80th of pensionable pay.
Pension increases by CPI in payment.

Section C

Pluses:

Final salary element accrues at the rate of 1/60th of pensionable pay.
Pension increases by RPI in payment.
Pension supplement up to state pension age.
Access to Bonusplan and extra RM contributions.

Minuses:

No lump sum as standard, but the ability to give up some pension to get one.
The Lower Earnings Deduction of £3,328 is taken off earnings to get pensionable pay.


I’m sure there’s a few more points I can’t think of at the moment, but in general Section B is better. Because although you’ll be paying a bit more in weekly contributions and your pension won’t increase by as much in payment, you’ll have a bigger pension to begin with, and a lump sum as standard at retirement.
Last edited by RobertT on 21 Nov 2017, 15:45, edited 1 time in total.

Pension section A/B v Section C

21 Nov 2017, 11:06

So overall section C is slightly worse off, DC scheme seems vastly inferior to both, I've been thinking about pension more recently as I'm getting closer to pensionable age.

Pension section A/B v Section C

21 Nov 2017, 11:39

A DC scheme will always be worse than its DB counterpart, because all you’re doing is building up a pot of money instead of accruing guaranteed benefits. You then have a number of options with that money.

It will always depend on personal circumstances, but as a general rule your DC pot would have to be worth nearly twice as much as your section C total pot value, to get the same benefits that you’d get with the RMPP.

For example if your section C pension is going to pay you £5k per year index linked/and spouses pension on your death, the 20x multiple rule will give a total pot value of £100k.

A 60 year old with just a DC pension to fund their retirement, would need a pot of around £180k to provide similar benefits.

*Neither example includes taking a tax free lump sum.

Pension section A/B v Section C

21 Nov 2017, 15:32

When I compared my full NRA60 pension and 25% reduced NRA65 pension at 60 for 40 years including the Addplan with a colleage who has 44 years in the Section B plan my pension is about £800 a year better off. But of course he does have a default lump sum of over £30000 as well! You do get the pension supplement as well for section c if you leave RM and before state pension age of about £56 for each year of service. And access to the Bonusplan AVC which is not available to section A/B members.

I should get my final paperwork from the Pension Centre late next month for filling in.

As my pension starts at the end of January I guess I will not get the full index linked increase in April as that is what is suggested on the RM Pension web site. Does that mean you lose that increase and your pension goes up by the next one (based on Sep 2018)? Or would it increase fully by both in April 2019?

Pension section A/B v Section C

22 Nov 2017, 09:22

fly-catchers wrote:As my pension starts at the end of January I guess I will not get the full index linked increase in April as that is what is suggested on the RM Pension web site. Does that mean you lose that increase and your pension goes up by the next one (based on Sep 2018)? Or would it increase fully by both in April 2019?

This is what is says in the relevant guide on the website:

If you begin receiving your pension part way through a Plan Year (i.e. a date other than 31 March), your first pension increase may be lower than the full year’s increase.


So from that, I would assume you would get a pro rata increase, which relates to the 2 months from end of January to end of March. So if inflation was 3% in September for example, you would get a 0.5% increase. You would then get the full yearly percentage increase starting from April 2019.

Unless someone else knows different?

Pension section A/B v Section C

22 Nov 2017, 11:53

I take it then, that it would preferable to carry on past retirement to the next April date to fully benefit from an annual increase.

Pension section A/B v Section C

22 Nov 2017, 13:26

Double post :oops:

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