It's goodbye from Ben

Dear all

I hope you know, there are changes coming up to Royal Mail’s pensions arrangements. Keep a look out in the Spring for this. This will also mean a change to my role so I will be stepping down from working on the RMDCP but I leave you in capable hands with the team. I wanted to take this opportunity to remind you of some of the key benefits of being a member of RMDCP.

Defined Contribution pensions, or “DC”, means that the rate of contribution that you and Royal Mail save is defined, but (unlike Defined Benefit, or "DB", pensions), the end benefit is not defined. Research indicates that you should save at least 15% for a comfortable retirement. The default contribution rate in RMDCP is 16% which should be enough to put you on course for a comfortable retirement if you keep that up. This was something the Trustees fought for and the company obliged. You only pay in 6% (before tax relief), which for most of you is turning £3 into £10, which is really good value. Another major change that’s happened since I joined was Pensions Freedom. When you want to retire you can do whatever you want with your money, which is nice! But it does bring challenges in deciding what's best for you when you may no longer have any income other than the State pension. Royal Mail and the RMDCP Trustees have an arrangement with HUB Financial Solutions for you to get personal advice, so if you have even thought about retirement, please take advantage of that. Currently, average pot sizes are small so most people take their pot as one or two cash sums.

You may have heard in the news about the recent pension crisis following the mini budget announcement. We were probably the first UK DC scheme to use Diversified Bonds for the pre retirement phase of the main investment strategy and the reason for this is highlighted in the chart below.

Graph showing significant outperformance of Diversified Bond Fund

Different investments have different characteristics so scaling them on a risk chart isn’t always that helpful. The investments in the red/purple line are probably more “low risk” than in the blue line but they have more duration. That means they are more sensitive to changes in rates. Some older members of DC schemes may have seen falls of around 30% when their pots were at their largest and their ability to pay more in, at its lowest. I am so pleased to say that the changes made to this scheme have largely protected against the effects of this event. It wasn’t absolutely perfect, but you can see the effects of how a well run scheme can benefit you and add value when the Trustees work hard to provide you the members with what you need.

There is a lot of value to be had from being a member in RMDCP. You don’t necessarily have to do anything but I do want you to value what the Trustees provide for you and how this can help lead you to a comfortable retirement. It has been a privilege and an honour to be involved in RMDCP, and I'm proud of what it has achieved as more people move to DC pensions to provide for their retirement in what has been a period of material change. And RMDCP has led the way that other schemes follow.

All the best, Ben

PS - Don’t forget the death benefits and your nomination form.

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