DB Pension membership charges

xylophone

ISTR hearing that some schemes when they reduced the benefits of the scheme gave its members the option of paying extra to keep the earlier retirement age (eg 60 vs 65),

This rang a bell - a long while back the RBS Scheme came up in connection with this so I had a quick Google.

https://www.theguardian.com/business/2012/jun/11/rbs-work-longer-contribute-final-salary-pension

I then found this

https://rbs.tbs.aon.com/RBS/media/default/PDFs/AEW guide GB v2.pdf

Defined Benefit Pension Plan T NI This plan is closed to New Joiners

If you joined the bank before 1 October 2006 and haven’t opted out, you’re likely to be a member of a Defined Benefit Pension Plan You can make some changes to your pension.

If your Normal Pension Age is 60 you can make a one-off election to change it to a Normal Pension Age of 65 and pay the lower RBSelect charge.

One infers that those who have retained (or wish to retain) retirement age of 60 are actually paying  a higher rate of "charge".

It is also described here

https://rbs.tbs.aon.com/rbs/media/default/pdfs/current pension plan/pensions_explained_181016_2.pdf

 as an "additional cost of membership"

This could be what the OP means.

WinceyWoo

There’s been multiple changes to the NatWest/RBS pension scheme over the last 10 or so years.

Pension Funding - now 10% (previously 15%)
Benefit Funding - now 10% (previously 15%).  Benefit Funding only applicable to managerial staff.  When funding rates changed from 15% to 10%, salary increased so, in theory, staff not impacted.  The cynic in me and as a long serving member of staff, believe there must be some benefit to NatWest.

The second change relates to NPA.  Originally it was 60 and they changed it to 65.  If you wished to retain NPA of 60, your contribution increased to 20%. Alternatively, you could accept NPA of 65 and continue to pay 15%.

Change number 3 relates to National Insurance contributions for members of defined benefit pensions and was adopted when government changed pension rules in around 2016.  NatWest took the decision to charge the extra employer costs to the staff.  Possibly this is the extra charge you can see?  It is currently a 2% charge.

Lastly the major change they made was limiting ‘pensionable’ salary used to calculate your benefit.  Can only increase by 2% a year maximum.  But of course you still pay the 15% or 20% contribution!  I am now a deferred member of the scheme when my actual salary vs pensionable salary gap was close to £20k, I decided enough was enough.

I would suggest your wife runs some options on WTW portal.

slider09

WinceyWoo said:

There’s been multiple changes to the NatWest/RBS pension scheme over the last 10 or so years.

Pension Funding - now 10% (previously 15%)
Benefit Funding - now 10% (previously 15%).  Benefit Funding only applicable to managerial staff.  When funding rates changed from 15% to 10%, salary increased so, in theory, staff not impacted.  The cynic in me and as a long serving member of staff, believe there must be some benefit to NatWest.

The second change relates to NPA.  Originally it was 60 and they changed it to 65.  If you wished to retain NPA of 60, your contribution increased to 20%. Alternatively, you could accept NPA of 65 and continue to pay 15%.

Change number 3 relates to National Insurance contributions for members of defined benefit pensions and was adopted when government changed pension rules in around 2016.  NatWest took the decision to charge the extra employer costs to the staff.  Possibly this is the extra charge you can see?  It is currently a 2% charge.

Lastly the major change they made was limiting ‘pensionable’ salary used to calculate your benefit.  Can only increase by 2% a year maximum.  But of course you still pay the 15% or 20% contribution!  I am now a deferred member of the scheme when my actual salary vs pensionable salary gap was close to £20k, I decided enough was enough.

I would suggest your wife runs some options on WTW portal.

The 'DB Pension' charge isn't 2% of anything as far as I can tell, it's 10% of the pension contributions ('RBSelect Pension').  She is 6 years or so away from retirement yet so no need for pension simulations.  I just wondered if she could claim additional tax relief on the £116.50 per month (for previous years as well, is it up to 4 years?).

Thanks

slider09

WinceyWoo said:

Lastly the major change they made was limiting ‘pensionable’ salary used to calculate your benefit.  Can only increase by 2% a year maximum.  But of course you still pay the 15% or 20% contribution!  I am now a deferred member of the scheme when my actual salary vs pensionable salary gap was close to £20k, I decided enough was enough.

So once she decides to retire the calculation to determine her pension isn't based on her actual final salary, but whatever the 'pensionable salary' is?

WinceyWoo

Slider, you are correct.  Her pension amount will be based on pensionable pay not actual pay.  For example, my pensionable pay was in the region of £33k, but actual pay of around £50k.  Any promotions or pay rises above 2% don’t count.  That’s why I suggested getting on the WTW portal, you need to decide if it’s worth remaining in this scheme.  I opted out of this scheme and now pay into the Retirement Savings Plan.  

The extra 2% employer national insurance charge is the only extra I can think she is being charged.  As it isn’t being paid into a pension doubt you can get tax relief on it.

xylophone

So once she decides to retire the calculation to determine her pension isn't based on her actual final salary, but whatever the 'pensionable salary' is?

 Presumably final pensionable salary - your wife needs to determine what part of her salary counts as pensionable?

Does the Administrator produce an annual personalised statement which shows this?

Is a "state pension adjustment" applicable in your wife's case?

slider09

xylophone said:

So once she decides to retire the calculation to determine her pension isn't based on her actual final salary, but whatever the 'pensionable salary' is?

 Presumably final pensionable salary - your wife needs to determine what part of her salary counts as pensionable?

Does the Administrator produce an annual personalised statement which shows this?

Is a "state pension adjustment" applicable in your wife's case?

She has just logged onto the system to check. Currently the ‘pensionable salary’ is £30k less than her actual salary, and given she has 5-10 years before taking her pension this gap is only likely to increase. 

WinceyWoo

Slider, on the WTW portal you can run reports on how much the pension will be if your wife comes out of the pension and defers until pension age vs what she will get if she stays and continues to pay.  Once you have this info, you can plug into Excel and decide if the return is worth the cost.

As I said before, I took the view to stop paying into DC and started in the Retirement Savings Plan.  

The bank publishes a list of payslip terms on our intranet - your wife will be able to download.

Good luck, it’s all a bit of a minefield!

xylophone

As I said before, I took the view to stop paying into DC and started in the Retirement Savings Plan.  

 Typo for DB?

RSP is the DC pension?

WinceyWoo

Xylophone, you are correct, RSP is the DC pension.