Dismay over new proposals for revaluing final salary schemes

Post by **stephen500** » 01 Nov 2007, 07:07

See below to see how Labour sells out the working class again!
"Dismay over new proposals for revaluing final salary schemes

http://observer.guardian.co.uk/cash/sto ... 24,00.html
Sunday October 28, 2007
The Observer

New rules to cut the cost to companies of deferred pension benefits - those final salary pension pots left behind by workers who move on to other jobs - were met with confusion and dismay last week.
Anybody who has money in such a scheme currently has the sum 'revalued' each year to take inflation into account, up to a ceiling of 5 per cent, a 'cap' that has been in place since 1986. But a government-sponsored review now suggests chopping this rate in half to lower the cost to companies of maintaining final salary funds.

If this proposal becomes legislation, then for every year until a worker's retirement, pension accrual rights will be adjusted by inflation but capped at 2.5 per cent, whichever is lower.
Crucially, says the Department for Work and Pensions, those final salary pension rights accrued so far - that is, those belonging to anybody who has already left such a scheme - will continue to have their money 'revalued' in line with the 5 per cent cap. It's those workers currently in final salary schemes who leave after the proposed introduction of the 2.5 per cent limit who could see the value of their pensions fall if inflation rises considerably above 2.5 per cent - in effect discouraging people from switching jobs.

How would this proposal operate in practice? Take a 45-year-old man who leaves a company where, after 15 years in a final salary scheme following the new rule's introduction, he was earning Â£40,000 a year. In this scenario, the company scheme offers 1/60th of salary for each year of service at the retirement age of 65; so at the point of his leaving the scheme, the benefit is worth 15/60 x Â£40,000 - an annual Â£10,000.

Assuming RPI inflation at 4 per cent for a further 20 years, his benefit would only increase by 2.5 per cent each year under the new rules and would grow to an annual Â£16,386 at retirement - Â£5,525 less than if calculated according to the current 5 per cent rule.

Unions and insurers - rarely in harmony when it comes to pensions - both point out there is little to gain for either side. 'While the benefits to employers won't be felt for some years, it's also unfair to former members of final salary schemes,' says John Lawson of Standard Life. 'Given that the government has been trying to get us to save, this doesn't make much sense.'
"

madelin4 · Post by **madelin4** » 01 Nov 2007, 10:16

Dont know a lot about this topic, but have read on a cwu post that Royal Mail are to scrap the final pension payment altogether, is that true? i.e. we wud not get the lump sum ?

Post by **TrueBlueTerrier** » 01 Nov 2007, 12:35

madelin4 wrote:Dont know a lot about this topic, but have read on a cwu post that Royal Mail are to scrap the final pension payment altogether, is that true? i.e. we wud not get the lump sum ?

They are suposedly starting a 60 day consultation exercise with everyone who is a member of all 3 schemes currently running in RMs final salary schemes A & B (Pre 90s) and C (Post 1990) (Although not sure of exact dates) . However, my guess is that they have made their minds up and we will all be transferred on 1 Apr 08 to the new and inferior one.

madelin4 · Post by **madelin4** » 01 Nov 2007, 12:40

TrueBlueTerrier wrote:
madelin4 wrote:Dont know a lot about this topic, but have read on a cwu post that Royal Mail are to scrap the final pension payment altogether, is that true? i.e. we wud not get the lump sum ?
They are suposedly starting a 60 day consultation exercise with everyone who is a member of all 3 schemes currently running in RMs final salary schemes A & B (Pre 90s) and C (Post 1990) (Although not sure of exact dates) . However, my guess is that they have made their minds up and we will all be transferred on 1 Apr 08 to the new and inferior one.

So the lump sum that people get from there pension due to early leaving due to illness will no longer apply when we hit 60 odds? A few people in my office have already got this sum due to ill health even tho they are not near retirement age.

Post by **TrueBlueTerrier** » 01 Nov 2007, 12:50

madelin4 wrote:
TrueBlueTerrier wrote:
madelin4 wrote:Dont know a lot about this topic, but have read on a cwu post that Royal Mail are to scrap the final pension payment altogether, is that true? i.e. we wud not get the lump sum ?
They are suposedly starting a 60 day consultation exercise with everyone who is a member of all 3 schemes currently running in RMs final salary schemes A & B (Pre 90s) and C (Post 1990) (Although not sure of exact dates) . However, my guess is that they have made their minds up and we will all be transferred on 1 Apr 08 to the new and inferior one.
So the lump sum that people get from there pension due to early leaving due to illness will no longer apply when we hit 60 odds? A few people in my office have already got this sum due to ill health even tho they are not near retirement age.

I think - but waiting for confirmation - That you can still get a lump sum and pension on medical retirement or at age 60 on the pension you have accured up to 1 Apr 08 (or when it changes) and again at 65 under the new scheme - however combined the total lump sums would be less than what you would get under the current scheme if it were to carry on.