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Schemes Not Linked

05 Apr 2019, 18:32

I was under the impression that the current new pension scheme would provide a lump sum and be somehow linked to our previous schemes for this purpose.

However I was told today by someone that the treasury will not allow the new scheme to be linked at all with the old scheme and that it is and will be completely separate from our other schemes. This will obviously effect the tax free amount you get until the scheme with the government comes into force.

Have I misunderstood this all the way through or were others under the same kind of impression ?

Schemes Not Linked

05 Apr 2019, 19:06

Royal Mail were in talks with HMRC as to whether the DBCBS could be linked to our RM pension at the time that the scheme was launched and seemed quite confident that it wouldn't be a problem however as far as I remember nothing was ever written in stone.

I can't remember seeing those stones since but I may have missed them.

Schemes Not Linked

05 Apr 2019, 19:20

The aim of the DBCBS is to provide some of our tax free lump sum when we take our pensions. It is already linked to our post 2012 benefits(RMPP).

The RM requested that it also be linked to our pre 2012 benefits(RMSPS), and they needed government approval for that to happen. If they don't get it, some tax may have to be paid on the DBCBS pot when we take it.
As far as I know there has been no announcement to say yes or no to that request.

Take a look at page 10 of the 2018 pension review booklet where it says:

At retirement, the vast majority of RMPP members take the maximum 25% lump sum, which is currently tax-free. To do this, they give up some of their pension.

These members will be able to use their DBCBS benefits to fund part or all of their lump sum. This is possible because the DBCBS is a scheme within the existing RMPP.

In order for the DBCBS benefits to work more efficiently for members, by allowing them to take their retirement lump sums in the most tax efficient way, the Company needs Government approval for some rule changes to the Royal Mail Statutory Pension Scheme (RMSPS). This is the scheme that has responsibility for members’ benefits built up to March 2012. As the DBCBS is a transitional arrangement, with these rule changes, we expect most members would be able to take their DBCBS lump sum entirely tax-free.

If Government does not agree to make the RMSPS rule changes, the DBCBS will still operate. However, some members would be able to take less of their DBCBS benefit entirely tax-free.

With Government approval, the lump sum would be paid at the same time as the benefits earned for service to 31 March 2018, either as part of the age 60 or age 65 benefits.

The way the scheme is designed means that members with pre 31 March 2018 benefits in the RMPP or the RMSPS would not need to give up some, or even any, of their pension built up to March 2018 to get the same lump sum. So members would build up a lump sum for service after 31 March 2018, but the outcome is more pension.

* AVC's are already linked to both RMPP and RMSPS benefits.

Schemes Not Linked

05 Apr 2019, 21:53

"The RM requested that it also be linked to our pre 2012 benefits(RMSPS), and they needed government approval for that to happen. If they don't get it, some tax may have to be paid on the DBCBS pot when we take it. As far as I know there has been no announcement to say yes or no to that request."

Thats the bit that I was told had been turned down by the government.

Must be due an announcement at some time one way or another...

Schemes Not Linked

06 Apr 2019, 04:41

It'll depend on individual circumstances in terms of which section you're in and the value of any AVC's. But looking at it in isolation, I would say the DBCBS would need to be in operation for 4-5 years for it to be worth more than 25% of my post 2012(RMPP) benefits 'pot'.

So in practice, the sooner CDC happens, the less of a problem it's likely to be.

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