AVC Pension Advice

Ferboz

Hello all, I was with Royal Mail for 13 years ( left 2001) and paid into 'AVC'. Even tho i was full time ..when i started the pension i was PT so i wasnt able to increase my payments, therefore its not a huge pension. my pension states a retirement age of 60 which is 1 year away. As i was 55 & in between jobs, i called RM Pensions regarding my options. I have written notes of my conversation & keep them with my yearly calculation, which they send me. These yearly calculations indicate i have a basic annual fund of £4000 ( i did say it wasnt a lot!) . However on my notes, after speaking to RM Pensions, i could take the funds early, either by taking a lump sum or an annual payment but at a reduced amount & i could ask for a retire option estimation. I have also written down NRA 60 .. have no idea what that means though...
I never contacted RM again as my circumstances changed in that i got a full time job , of which i am still working, so thought just wait until 2023. I guess my question is, in 2023 when i am 60, will RM contact me with one of these options? That i will receive £4000 ( as i doubt it will change much) monthly/yearly or i can take a lump sum.. I cannot understand why RM would be offering a lump sum...there is no mention of it on my yearly statement they send me... i can only assume if i have written things down correctly...( and its a big if!) then they would calculate to a certain age & you get it al at once rather than drip feed so to speak. Hopefully someone will have some advice. Thank you 

Dazed_and_C0nfused

Do you have two pensions with Royal Mail,

A defined benefit one which will pay a guaranteed pension from NPA for the rest of your life
And

A defined contribution pension pot from making Additional Voluntary Contributions?

dasherman

With 13 years service ending in 2001, I assume you started in 1988, which puts you in section C.

Therefore you have 13 years of final salary pension, with your salary when you left RM being used.

That provides a pension for life with the option to commute some for a lump sum.

NRA60 stands for 'Normal Retirement Age 60'.

Any decision to take it beforehand will mean a reduction in benefits, typically around 5% per year. There is no benefit to deferring past NRA.

Section C had the Lower Earnings Deduction taken away from basic pay to work out pensionable pay, that LED was frozen at £3,328 around 1999/2000 I think. Which maybe why you think you had a part time pension?

They should automatically contact you around 4 months before you're 60th birthday.

You would have had the potential to pay into 3 different AVC's arrangements:

Addplan – you bought extra years service.

Bonusplan – both you and RM paid a small amount per week, which was then invested as per your choices. Your contribution would have been worked out as 4.5% of the LED.

Flexiplan – you paid in an amount per week which was then invested as per your choices.

It's not clear which AVC you paid into, or whether you paid into more than 1. But options 2 & 3 are usually used to fund the tax free lump sum when taking your main NRA60 benefits, so you don't have to give up as much or any pension to get that lump sum.

The government took over the liabilities for pre 2012 RM pensions as part of the privatisation of the company, and set up the RM Statutory Pension Scheme, so your point of contact is them: https://www.royalmailsps.co.uk/

You may also find the RMPP(2012+) website also has relevant info: https://www.royalmailpensionplan.co.uk/

OldBeanz

You need to find out exactly what you have as per above. £4k per year at 60 would cost you over £100k to buy and will top up your state pension at 68 nicely.
When you take your pension it will be taxed alongside normal taxable income but if working you will have the ability to invest further in a pension.