Royal Mail defined benefit pension

Hasselhoff

I have just phoned them and found a human at capita 8-)

Yes, there is zero flexibilty within the Royal Mail defined benefit scheme
No ability to cash in as a whole or have 25% tax free and the rest as draw down
My pension is based as a lowish lump sum then a yearly amount till the day I die from the age of 60
I can take it from 55 but the lump sum/monthly amounts as you sayMiiade, is reduced by 5% per year of every year you take it early

She is now going to send me a early pension statement which will show the age 60 pension and the reductions if taken at 55

Lastly, one of my key worries, is that being unmarried/single and having no dependent below the age of 18, should I die, no one will get my pension fund but it will be absorbed by royal mails own pension. That alone will probably see me seeking another defined fund to ensure my family and not royal mail, benefits in the event of the inevitable death that awaits us all.

Thank you everyone for your inputs, advice and suggestions

Andy_L

Hasselhoff wrote: »

Lastly, one of my key worries, is that being unmarried/single and having no dependent below the age of 18, should I die, no one will get my pension fund but it will be absorbed by royal mails own pension.

That is sort of the point of pooled pension funds. Some people pay in and receive nothing, some live to 100+ and take out loads, most people are somewhere in between those extremes

coyrls

Hasselhoff wrote: »

That alone will probably see me seeking another defined fund to ensure my family and not royal mail, benefits in the event of the inevitable death that awaits us all.

You will not be able to find another Defined Benefit (DB) pension to transfer your money to, unless you are employed by an employer that offers a DB pension. There is no such thing as a non-employer provided DB pension.


Also the Royal Mail will not benefit from your death; it has no ability to take money from the DB scheme.

AlanP_2

What Royal Mail generously offered you when you joined them was the promise to pay you an amount per year once retired until you die, and if you have a spouse / dependents under 18 when you die an amount per year for them as well.

That was the deal - no pots, no passing it on to 30 year old children or the local Dogs Home.

If you didn't want that you should have said no thanks and set up your own private pension without any contribution from Royal Mail.

Not trying to be overly harsh but having a DB pension to provide you with a guaranteed income once retired is something to value not complain about.

Most private sector DB schemes allow transfers out, most government backed ones don't. The differences being that the private schemes have investments purchased with contributions that fund the pensions, government ones have today's taxpayer funding the pensions being paid out (as previous governments took the contributions and used them like any other income they received).

Don't forget the private schemes that allow transfers out are not doing it out of kindness and generosity. Whilst on balance it should be neutral for the scheme in reality as we live longer they are saving money over the long term which means the receiver is losing.

Hasselhoff

Not trying to be overly harsh

Oh I think you are Alan but every forum has one such as you.

The funny thing is, when the change came for a newer type of pension, the advice from the union was that people should stay with the db pension, I seem to recall it was a long time before personal pension flexibility was allowed but it seems we have had the flexibilty not applied just to make the sale of Royal mail happen.

Anyway, with the exception of Allan, everyone has been mostly helpful, friendly, informative and the answers sought, have been supplied by the kinder members within it. To those, thank you it has cleared everything up.

DairyQueen

My bro also has benefits under Royal Mail NRA60 and its successor (NRA65). It has since been superseded by a DC scheme.

I researched bro's RM pension benefits as he approached his 60th birthday.

NRA60 is a final salary DB scheme underwritten by UK taxpayers. This is a gold-plated pension scheme akin to those only now offered in the public sector. You are extremely fortunate to have deferred benefits and most people would give an arm and a leg for so valuable a pension. It will pay you an index-linked, risk-free amount from age 60 for the rest of your life. However, there is no enhancement if you defer taking it passed age 60.

The cost of the UK taxpayer guarantee is that you cannot convert the benefits into a cash value. It is 'unfunded' and this means that there is no pot of money held by RM (or the government) to fund the pensions in payment. Instead, your pension will be paid from current taxpayer receipts. This is why you cannot apply to transfer a cash equivalent amount into a more flexible (but risky) DC/SIPP. There is no 'pot' to transfer. The only beneficiaries if you die prematurely will be UK taxpayers (especially the working young like your children).

A DB pension is a promise to pay an annual amount to you and (usually) to any spouse/civil partner/dependents that survive you. 'Funded' DB schemes (i.e. those in the private sector) allow transfers as there are 'pots' of money invested to support the liabilities of the schemes. Even so, a transfer out of any DB scheme is fraught with difficulty. There are hundreds of threads on this forum that explain the reasons.

30-something children are not defined as 'dependents' under DB rules because, unless disabled, they are not (ahem) 'dependent' on your income to pay for necessaries like food and shelter.

I understand that, without dependent children or spouse, you may not be able to access all of the benefits of NRA60 but DBs are 'collective' schemes. Like insurance, some people will benefit more than others. Typically, those who live into their 90s will receive the most benefit whilst those who fall off the perch shortly after retiring (minus spouse and young kids) will receive the least. I pay several hundred pounds in insurance each year to fund other peoples' claims just in case my house ever burns down.

You are able to transfer to another DB scheme but this would not meet your objectives. Firstly, it's unlikely that any alternative DB would exceed the benefits offered by NRA60. Secondly, not all DB schemes accept transfers-in, Thirdly, private sector companies with DB schemes available to new employees are rarer than hen's teeth.

So, to achieve what you want to do:

a) Find a job with an organisation (probably in the public sector - i.e. Local Government as the LGPS is the only funded public sector scheme that still offers DB pensions to new employees), and allows transfers-in. Hopefully, SilverTabby will advise on the constraints of transfers-in and out of the LGPS.
b) Transfer your RM benefits to the DB of the new employer.
c) Find an IFA (must be a Pensions Technical Specialist) willing to provide you with the (mandatory) advice required to facilitate a transfer. This is a rapidly reducing pool and the cost of such advice isn't cheap (cost in ,000s).
d) Assuming that the IFA recommends transfer (unlikely) find a scheme willing to receive the cash (not all do).
e) If the IFA advises against transferring (very likely) then you need to find a pension platform willing to accept you as an 'insistent client'. There are very few of these.
f) Decide how to invest the money. This is not as easy it sounds. What will you do if your investment falls 20% or 50% within a year of you transferring? A crash is now overdue and will happen.

You cannot transfer within a year of any DB scheme's normal retirement age.

So, it may be possible to get your hands on the cash equivalent of your RM benefits but, boy oh boy, it will be one heck of a mountain to climb. It will require you to jump through all kinds of hoops simply to handover cash to your adult kids.

If this is your only source of guaranteed pension income, or (God forbid) your only pension, in addition to the State Pension (and do you qualify for the max SP?) then you are not in a position to alleviate your kids' debts at such risk to yourself.

If you manage to climb the above Mt Everest, and then give away a chunk of your TFC to your kids, and then attempt to claim means-tested benefits should your self-investing not work-out (and this is a risky business - expect investments to crash at least once each decade), that cash gift will be defined as intentional 'deprivation of assets' by your LA and they will assess you as still having the capital.

You do not have to transfer-out of RM NRA60 to receive a lump sum in cash. You may take all of the benefit as an annual pension or a maximum amount of TFC (plus a reduced pension) is available.

The info you have provided is pretty scanty but my advice to Bro (still working full-time at age 62) was to take the max annual pension from NRA60 at age 60 (as no benefit for deferring) and reinvest the total directly into another pension. He is taxed on the pension in payment but the tax is recovered courtesy of his additional pension contribution. As this is a DB pension in payment the MPAA is not triggered. He intends to work until age 67 (and will defer his SP for a year). He will then have access to a flexible DC pot in addition to his RM pension(s).

Silvertabby

So, to achieve what you want to do:

a) Find a job with an organisation (probably in the public sector - i.e. Local Government as the LGPS is the only funded public sector scheme that still offers DB pensions to new employees), and allows transfers-in (and transfers out to non-DB schemes!). Hopefully, SilverTabby will advise on the constraints of transfers-in and out of the LGPS.
b) Transfer your RM benefits to the DB of the new employer.
c) Find an IFA (must be a Pensions Technical Specialist) willing to provide you with the (mandatory) advice required to facilitate a transfer. This is a rapidly reducing pool and the cost of such advice isn't cheap (cost in ,000s).
d) Assuming that the IFA recommends transfer (unlikely) find a scheme willing to receive the cash (not all do).
e) If the IFA advises against transferring (very likely) then you need to find a pension platform willing to accept you as an 'insistent client'. There are very few of these.
f) Decide how to invest the money. This is not as easy it sounds. What will you do if your investment falls 20% or 50% within a year of you transferring? A crash is now overdue and will happen.

You cannot transfer within a year of any DB scheme's normal retirement age.

So, it may be possible to get your hands on the cash equivalent of your RM benefits but, boy oh boy, it will be one heck of a mountain to climb. It will require you to jump through all kinds of hoops simply to handover cash to your adult kids. Posted by DairyQueen

Absolutely spot on. Plus, the transfer in to the LGPS would be at the employer's discretion, so not only would OP have to get a job with LGPS membership, but he would also have to find an employer who would allow a transfer in. (Before anyone chirps up 'transfer club scheme' I can't see RM on the current list - but even if it were, wouldn't be an option as OP's gap between leaving RM and (theoretically) joining the LGPS is more than 5 years).

Then, even if he did find an IFA that would approve the transfer from the LGPS to a money purchase/drawdown scheme (teeth, hens and rare spring to mind) the LGPS transfer factors are notoriously low. Forget the 40 x annual pension given up figures mentioned on these boards - transfer factors for the LGPS are set by GAD, and a figure of 18 x annual pension given up wouldn't raise my eyebrows.

hyubh

Hasselhoff wrote: »

Not trying to be overly harsh

Oh I think you are Alan but every forum has one such as you.

The way you are putting things, you want the best of both: DB security (with accompanying value) and DC flexibility. The value of your DB benefits is however correlative to who is now backing them - i.e. the UK government and ultimately general taxpayer. Moreover, you never had the ability to pass away your DB pension when you left, so you haven't actually 'lost' anything.

The funny thing is, when the change came for a newer type of pension, the advice from the union was that people should stay with the db pension,

Right, because the existing DB arrangement was very likely superior to the replacement DC option.

Hasselhoff

The way you are putting things, you want the best of both:

hyubh, this clearly was not the case. I had a RM pension and thought this was the best place to ask on it . I was clear on what I wanted to achieve from the outset and was seeking possibilities and what was not possible.

As the helpful posts came in, we whittled through the questions one by one, the answers came with some good and friendly inputs till we had answered them all and it was summed up within the last few posts where I thanked those who had been helpful and I am extremely grateful too.

I'm not sure why you have seen it differently but your last post along with allans, were disappointing.

Anyway, to those who helped as I've said before, thank you for your help and as we reached a conclusion, things are much clearer so I won't need to revisit the thread.