Error on pension illustration 2012 may be wide spread

[mallard63]

Well I can tell you that my call to the helpline has so far proved fruitless as far as explanations go!" Its only a forecast, its only a forecast; This is what I am trained by Royal Mail to state"
The fact that this forecast doesn't add up was beyond the helpline .
To re-iterate, it has nothing to do with my pension forecast going down or wrong amounts on a P60. All the forecast figures are correct with what one would assume them to be based on the previous years EXCEPT the Maximum Lump Sum figure shown under the NRA60 benefits.
If an annual pension figure has risen slightly, then the 'pot' to pay for this increase must theoretically, have also risen. Therefore if you were to take the MLS of 25% of the 'pot' , then this figure must also show a slight increase, not a decrease of 15%
You can't have your yearly pension figure rising and your lump sum decreasing at the same time unless some very devious new method of calculation has been brought in?
I thought the undertaking was that members accrued pensions now under Gov. control would not be adversely affected!!
Have sent a comprehensive email and awaiting call back in next 72 hours!

[stephen500]

New illustration received. Pension returns to normal + uprating for inflation.
So error was new pay system.
see above.
If your pension is down, for no good reason ie no change of shift or allowances.
then
1) ring HR/pensions
2) ask what pensionable allowances have been assigned for 2012 illustration
3) ask what they were for 2011
4) if inferior ask to check that reduction was not due to 2 employments P60 ending April 12.
No real 2 employments. 1) is pre psp 2) other is post psp.
resulted in no pensionable allowances since Nov 11 in our region (possibly)..certainly for me.
Ask them to add allowances and issue revised illustration.

[POSTMAN]

So,if we don't ask for a new illustration if we think it's wrong (i have no idea about mine) will it automatically be updated?
Can we get a copy of lasts years one to compare?

[nataddick]

Hi
I have followed this recent thread as pensions are close to my heart having previously worked for Legal & General in their pensions department - many moons ago!

I got my benefit illustration yesterday and noticed that the maximum tax free lump sum under NRA 60 Benefits had gone down - I starting doing some research and came across a key piece of information - that has not YET been widely publicised.It can be found by visiting the following link and downloading the Top BI Questions 2012 pdf document. Go to Q8 and the likely answer is given for the fall in tax free cash. It seems that in previous years, the pension supplement has been included in the calculation of the lump sum that could be taken at age 60 for section C members as it was assumed (wrongly so in my opinion) that the member would leave upon taking their pension at 60. If a member does not leave, they are not entitled to receive the pension supplement and therefore the value of the tax free cash is lower since it based on the pension actually payable - using a cash commutation factor. This means that previous years' benefit illustrations have actually over inflated the value of the pension and tax free cash for those of us who will work on beyond 60. The Trustees assumption that people would leave at 60 had led to many members being misled.

http://www.royalmailpensionplan.co.uk/76/faqs" onclick="window.open(this.href);return false;

I have tried to copy an extract of the pdf so I could paste it directly here but without success. Maybe somone else who has the necessary software can do it for the benefit of members.

[RobertT]

You beat me to it nataddick!

The extract is as follows:

Q8 Why has my lump sum at 60 gone down?
A In previous years, the pension supplement has been included in the calculation for the
pension lump sum at 60, for C members, as it was assumed that the member would leave
upon taking their pension. As the supplement is only payable if you cease employment with
Royal Mail (or associated employer) before state pension age, it is not included in the lump
sum calculation, as there is now no retirement age from the business and you can continue
to work and contribute to the scheme past 60. Therefore you would not be eligible for the
supplement. The figure for the lump sum reflects the amount that you would receive should
you take your pension and remain in employment.

Surely the statement should reflect both options of staying on and leaving at 60.

[N1-22postman]

Hi - Would someone please explain what the "Pension Supplement" is.

[RobertT]

Hi - Would someone please explain what the "Pension Supplement" is.

Tbh I'm not exactly sure how it's worked out, but it's based partly on your pensionable service and partly on the Lower Earnings Deduction. All it says on the pensions website is this:

If your Normal Retiring Age under the Plan is before your State Pension Age and you choose to retire and leave the Company at Normal Retiring Age, you will also receive a pension supplement that is payable up until you reach State Pension Age. The Pensions Service Centre can answer any further questions you may have.

[stephen500]

So,if we don't ask for a new illustration if we think it's wrong (i have no idea about mine) will it automatically be updated?
Can we get a copy of lasts years one to compare?

I wouldn't bet on automatically. I have told my area rep who is forwarding details to CWU Hq.
Another person raised the issue of class "c" members seeing a reduction on lump sum, due to pension supplement etc.
This does not apply to me as I am class "B".
My error was pSP related and is detailed above and has been put right.
Another friend had his put right yesterday. He e-mailed them.

[genesis]

So,if we don't ask for a new illustration if we think it's wrong (i have no idea about mine) will it automatically be updated?
Can we get a copy of lasts years one to compare?

I have compared with 2010 illustration and 2011 illustration , and everything seems to be inline with previous years illustrations except the maximum lump sum which has dropped by £6800. A percentage of about 15%, this is quite a drastic fall ,my pension is c type.

[RobertT]

I have compared with 2010 illustration and 2011 illustration , and everything seems to be inline with previous years illustrations except the maximum lump sum which has dropped by £6800. A percentage of about 15%, this is quite a drastic fall ,my pension is c type.

It sounds to me that your situation will refer to the pension supplement issue as first mentioned by nataddick. So if you take your pension at 60 and leave RM you will still recieve the supplement and be entitled to a larger lump sum.

As a rough guide to working out the value of your pension at 60, multiply your annual pension(NRA60) by 20 and then divide by 4 and you will get(roughly) the lump sum you'll be entitled to.
If your planning on retiring from RM at 60 include the supplement before multiplying by 20, if you want to take your pension but carry on working don't include the supplement.

Hope that helps.

[RobertT]

I've found out my copy of the 'guide to benefits' for RM pension scheme section C members and this is what it says about the pension supplement:

Pension Supplement - An additional amount of pension based on pensionable service and the lower earnings deduction. It may be paid in addition to your plan pension but ends when you reach state pension age. Under the plan's rules, any pension supplement due would not be paid until you stop working for the company.

The supplement is worked out as follows:

For pensionable service before April 2008:

1/60th of the average lower earnings deduction over the period during which final pensionable pay is calculated, with an additional pro-rata amount for part years.

So in other words £3,328 divided by 60 multiplied by years of final salary service.

For pensionable service on or after April 2008:

The sum of the supplement blocks that have built uo for your pensionable service after 31 March 2008(increased in the same way as your pension blocks up to the renewal date before your last day of service).
The supplement block for each plan year is calculated at the renewal date as 1/60th of the lower earning deduction(reduced for part time staff or for special leave, etc).


The pension supplement is only (potentially) payable for section C members, so those who started working for RM between April 1987 and April 2008.

[genesis]

I have compared with 2010 illustration and 2011 illustration , and everything seems to be inline with previous years illustrations except the maximum lump sum which has dropped by £6800. A percentage of about 15%, this is quite a drastic fall ,my pension is c type.

It sounds to me that your situation will refer to the pension supplement issue as first mentioned by nataddick. So if you take your pension at 60 and leave RM you will still recieve the supplement and be entitled to a larger lump sum.

As a rough guide to working out the value of your pension at 60, multiply your annual pension(NRA60) by 20 and then divide by 4 and you will get(roughly) the lump sum you'll be entitled to.
If your planning on retiring from RM at 60 include the supplement before multiplying by 20, if you want to take your pension but carry on working don't include the supplement.

Hope that helps.

Thanks robert t,you may be right,as mentioned by nataddick,but the formats of the illustrations are the same ie in 2010
2011 and 2012 I find it all very dubious.

[stephen500]

So this thread is begining to get confusing and has spilt into two.
The problem with my pension illustration was the introduction of PSP and the failure to take pensionable allowances into account since it's start date of Nov 11. This has now been corrected, after I asked about it and I have a new illustration, with the allowances restored.
I am a class "B" member.
If yours has gone down for no good reason, then you may want to query if this is the problem.
Then there is the question of pension supplements.
Because it has spilt into two, this may make this thread confusing.
So think which you think will apply to you.

[heapsy]

I rang pensions today and got this reply; apparently the difference with the lump sum from the NRA 60 is down to RMs assumption that people will now be working until 65.
As for allownces, I work in delivery and we have not had pensionable allowances since 2010 and that is why they are not listed. My NRA 60 lump sum dropped from £34,557 to £29,114.

[RobertT]

I rang pensions today and got this reply; apparently the difference with the lump sum from the NRA 60 is down to RMs assumption that people will now be working until 65.

As already mentioned earlier in this thread.

My NRA 60 lump sum dropped from £34,557 to £29,114.

But if you take your pension/lump sum at 60 and leave RM you would still get the £34k.