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Difference between the current scheme and Possible new scheme

08 Jul 2018, 11:35

Just wondered if someone could explain what the difference is between the current new scheme which started in April and the proposed scheme which the company and CWU are discussing with the government.

Thank you

Difference between the current scheme and Possible new scheme

08 Jul 2018, 12:48

Hawkey99 wrote:Just wondered if someone could explain what the difference is between the current new scheme which started in April and the proposed scheme which the company and CWU are discussing with the government.

Thank you


I ain't being funny or anything mate... but are you serious ? ? ?

All you need to know has been posted through your letterbox or can be found on this Forum/Website.

What on earth did or didn't you vote for earlier this year ? ? ?

Difference between the current scheme and Possible new scheme

08 Jul 2018, 15:15

Here's a quick overview:

The DBCBS, which began in April is a pot of money that's building within RMPP, designed to fund the tax free lump sum when we take our pensions. It's works in basically the same way as AVC's (Bonusplan and Flexiplan).

The proposed CDC scheme aims to provide similar benefits to a DB pension(lump sum and income for life), but it doesn't offer any guarantees as to how much income we could get in retirement.

As Deckyboy says, there's plenty of info out there to give you a better idea. The Q&A's on My Royal Mail is a good place to start. https://www.myroyalmail.com/2018pensionreviewqanda

Difference between the current scheme and Possible new scheme

08 Jul 2018, 15:18

Perhaps if you can take the time to show my shortfall you could be kind enough to also take the time to provide the difference between the temporary scheme and the scheme being discussed with the government.

Difference between the current scheme and Possible new scheme

08 Jul 2018, 15:18

Thanks Robert.

Difference between the current scheme and Possible new scheme

08 Jul 2018, 15:22

So if someone is considering taking their pension shortly and have significant AVCs, to avoid tax due (if their AVCS & DBCBS comes to more than 25%) than they would be better off waiting for the Government scheme to start.

Is that right ??

Difference between the current scheme and Possible new scheme

08 Jul 2018, 15:52

Hawkey99 wrote:So if someone is considering taking their pension shortly and have significant AVCs, to avoid tax due (if their AVCS & DBCBS comes to more than 25%) than they would be better off waiting for the Government scheme to start.

Is that right ??

No!

The DBCBS is part of the RMPP and must be taken along with either existing NRA60 or NRA65 benefits.

The DBCBS has an NRA of 65 but with the caveat that we can also take it from 60 along with our NRA60 benefits.
If you want to take your DBCBS pot with your NRA60 before 60, or with your NRA65 before 65, you'll be hit with a reduction.

If your DBCBS pot takes you over the 25% tax free limit, then with the excess amount you can either:

Pay tax on it.
Transfer to another provider for drawdown or annuity purchase.
Or
Carry on paying into the DBCBS to provide a lump sum with your NRA65 benefits(assuming you're only taking your NRA60).

The proposed CDC scheme will be totally separate from the RMPP, and will provide different benefits. So what you do with your RMPP pension/s including AVC's and the DBCBS, will have no bearing on your CDC benefits.

Difference between the current scheme and Possible new scheme

08 Jul 2018, 16:21

Hi Robert, many thanks for your reply. My concern is Im around the 25% tax free in my AVCs currently and wondered if the DBCBS scheme would make this worse and therefore taxable.

"Pay tax on it.
Transfer to another provider for drawdown or annuity purchase.
Or
Carry on paying into the DBCBS to provide a lump sum with your NRA65 benefits(assuming you're only taking your NRA60)."

Most of our funds are in the NRA 60 scheme so if I only take that my AVCs will be over 25% of the total value so I assume my only option is to go with your first option to transfer it for drawdown.

"The proposed CDC scheme will be totally separate from the RMPP, and will provide different benefits. So what you do with your RMPP pension/s including AVC's and the DBCBS, will have no bearing on your CDC benefits."

Can you explain the above sentence with perhaps an example. Does this mean that potentially we will have 4 pension pots (era 60, era 65, DBCDBS scheme and CDC scheme.

In finality and I know you can't give financial advice, which is the best way forward for anybody with a high percentage over 25% of their combined pension pots in AVCs.

Thanks again

Difference between the current scheme and Possible new scheme

08 Jul 2018, 17:38

Hawkey99 wrote:Hi Robert, many thanks for your reply. My concern is Im around the 25% tax free in my AVCs currently and wondered if the DBCBS scheme would make this worse and therefore taxable.

"Pay tax on it.
Transfer to another provider for drawdown or annuity purchase.
Or
Carry on paying into the DBCBS to provide a lump sum with your NRA65 benefits(assuming you're only taking your NRA60)."

Most of our funds are in the NRA 60 scheme so if I only take that my AVCs will be over 25% of the total value so I assume my only option is to go with your first option to transfer it for drawdown.

You also have the option to defer taking any excess AVC money until you take your NRA65 benefits. Infact technically you don't have to do anything with it until you're 75.

"The proposed CDC scheme will be totally separate from the RMPP, and will provide different benefits. So what you do with your RMPP pension/s including AVC's and the DBCBS, will have no bearing on your CDC benefits."

Can you explain the above sentence with perhaps an example. Does this mean that potentially we will have 4 pension pots (era 60, era 65, DBCDBS scheme and CDC scheme.

At the moment we have 2 pensions – NRA60 and NRA65. Alongside those we now have the DBCBS to provide some or all of the tax free lump sum, plus some people have AVC's which are also used to provide the tax free cash. They all come under the wing of the RMPP, (although it is possible to transfer AVC's out independently if you so choose).

The CDC scheme if it happens, will be a completely different scheme with an NRA of 67! It aims to provide similar benefits to a DB scheme(but with no guarantees) with the Defined Benefit Lump Sum Scheme(DBLSS) sitting alongside it to provide the tax free lump sum element, in a similar way to how the DBCBS & AVC's will provide some or all of the lump sum with the RMPP.

You need to treat the RMPP / DBCBS / AVC's as one scheme, and the CDC / DBLSS as another scheme.

In finality and I know you can't give financial advice, which is the best way forward for anybody with a high percentage over 25% of their combined pension pots in AVCs.

Thanks again

Everyone is going to be different based on their own circumstances, etc. But for what it's worth this is my rough plan:

Personally I have both Bonusplan & Flexiplan and already have more in total to cover the 25% tax free lump sum. My plan is to take my NRA60 at 60 along with my AVC's, taking 25% of my total pot tax free and transferring the remainder of the AVC's out to drawdown.

I then plan to take my NRA65 at 65 with my state pension kicking in at 67.
I hadn't originally planned to take any lump sum at 65 either by taking a reduced NRA65 pension or from deferring any AVC's. But I now see the DBCBS as fitting that purpose, although we don't yet know how long it will be in operation for.

Between 60 and 67 my combined yearly income from NRA60, NRA65 and the excess AVC funds should be roughly equal to the personal tax allowance and so I should only pay a small amount of tax, if any at all!
Plus I will still have the tax free cash taken at 60 to dip into during my retirement.

I actually plan to retire at 55(I'm currently 50) but aim to fund that by using a personal pension, taking the 25% up front and drawing down the rest over those 5 years. Depending on how my funding of that goes, I may transfer my Bonusplan over to help with that age 55 target? Again the aim is to take all or most of the personal pension tax free!

Although my income from 55 onwards will be less then now, because I currently save heavily, the money in my pocket will be higher!

Personally I'm not making any assumptions as to what I might get from the CDC/DBLSS as it might not even happen!
I'm basing my plans on just what I've already accrued from the RMPP /AVC's, and the current value and contributions of the personal pension.

Therefore I'm treating whatever pension I get from RM over the next 5 years as a bonus to a large degree!

I hope that helps in some way and you can substitute your situation into my plans to some extent.

Difference between the current scheme and Possible new scheme

08 Jul 2018, 19:01

Having just read your latest reply Robert, it almost completely mirrors my plan. I'm 51 very soon. People need to look at your post, and some of mine more closely, as many may not be able to work until 67, 68 etc. Back in October last year, I looked at my options for work elsewhere, taking my NRA60 and working part time. The main issue for me at least, would be whether I could find suitable work, with the right work / life balance. Many jobs now require people to work unsocial hours, (Tesco, Sainsbury's etc). I'm investing heavily like you, so hopefully at 60, I can walk away from it all if I've had enough.

Difference between the current scheme and Possible new scheme

08 Jul 2018, 22:04

RobertT, you seem to be really clued up and knowledgeable regarding pensions. And also quite financially savvy! Are you sure your only a postman opg... Lol.

I hope to be a good position as you I hope one day! We can always dream! But I do not wish to prolong such a stressful career that I have personal experienced and have found royal mail to be, what would you suggest contribution wise into avcs? I don't mean to ask how longs a piece of string but I am relatively young and I just dread the thought if working into my 60's. How did you manage to get yourself in such a good financial position? Are you a big on overtime and working extra hours it any other tips for us poor posties To Help achieve that pipedream of early retirement.....

Difference between the current scheme and Possible new scheme

09 Jul 2018, 05:30

rmchat112 wrote:RobertT, you seem to be really clued up and knowledgeable regarding pensions. And also quite financially savvy! Are you sure your only a postman opg... Lol.

Lol! Yes I'm just a postman, but with a long standing interest in pensions due to deciding I wanted to retire early when I was in my 20's. Which I except is much younger than most people take an interest in their retirement.

I realised the RM DB pension was a good base to start from but by itself wouldn't be enough to do what I wanted to do, and that was long before any of the changes we've witnessed in the last 10 years.
I also realised that investing in equities would make more than saving into cash accounts over the longer term.

I hope to be a good position as you I hope one day! We can always dream! But I do not wish to prolong such a stressful career that I have personal experienced and have found royal mail to be, what would you suggest contribution wise into avcs? I don't mean to ask how longs a piece of string but I am relatively young and I just dread the thought if working into my 60's.

AVC's are very good value for money because when you factor in tax relief and PSE, each £10 gross contribution only actually costs you £6.80, with the government paying the other £3.20. Plus with Bonusplan you get a contribution off RM too!

My general advice would be to pay into AVC's as much as you can afford, while staying within the limits for PSE(there's threads on that subject on these forums).

How did you manage to get yourself in such a good financial position? Are you a big on overtime and working extra hours it any other tips for us poor posties To Help achieve that pipedream of early retirement.....

There's no real secret – it's just save, save, save. Or to be more precise invest, invest, invest!

I've never been an overtime king but I've always wanted to make the most of the money I've got. Many people I know go to work, earn their money and then just spend it all. And if they want to spend any more they need to go to work and earn more.
I except some haven't always got a choice, but I did have a choice and I wanted to break that cycle!

It's a long road to take, but the idea was to save/invest and make my money grow and make it work for me, so that at some point in the future I'd have enough to not have to work anymore.

Personally I look to save first and then spend what's left! If I get a pay rise I increase my saving levels. If I get some kind of bonus, I save at least some of it. I've even saved my Christmas tips!

The 'live for today' brigade have mocked me a few times over the years, but if I hadn't done what I've done I wouldn't be able to retire completely before 65 and possibly 67(my state pension age).
In reality my saving habit should enable me to retire quite comfortably at 55 and thus knocking 10-12 years off my working life. Personally I think that's well worth it and am looking forward to the looks on those peoples faces when I hand in my PDA for the last time.

Some people will say that money is for spending. But personally I think the whole point of saving is to spend it – you're just postponing spending it! And if your saving into a pension, you're receiving tax breaks off the government, employer contributions and investment growth. Over the years and with the effect of compounding you'll end up with a lot more!

Difference between the current scheme and Possible new scheme

09 Jul 2018, 10:55

Great post Rob. There are people in my office who wonder why I'm doing as you are. Loads just thinking about spending everything. What strikes me is that the younger ones avoid doing overtime, probably because of family tax credits etc. They also seem to think they will be able to walk into another job as and when it suits them. :no no As you will know, that wont be as easy as they think. The physical nature of the job will catch up with people eventually, which is why I intend to retire no later than 60.

Difference between the current scheme and Possible new scheme

09 Jul 2018, 15:37

Hi Robert,

Thank you so much for your helpful and informative post.

If only the company were able to provide such clarity (even though I'm still confused a bit) and helpful information as you do for us, we would all be in a much better position.

A very sincere and huge thank you from all of us for your help.

Difference between the current scheme and Possible new scheme

09 Jul 2018, 15:38

Inspirational posts both from Robert and Heapsy.

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