Retirement age

New age discrimination laws came into effect at the end of 2006. By law, employees cannot be discriminated against on the grounds of age. The Company's standard retirement age is 65, and a member of the Pension Plan cannot be 'forced' to retire at 60. Currently, if a member wants to carry on working for the Company to 65, they can continue to pay contributions into the Plan and build up to five years' extra pension, provided they don't exceed the maximum pensionable service under the Rules (45 years).

Yes, the Personal Illustration modeller has been amended to allow for this change so if you request another Personal Illustration it will show a higher pension at age 60. Please remember, however, that the estimated pension at age 65 will still be worked out based on a maximum number of years' service of 45 years, so pension figures shown on your Personal Illustration, once you reach the 45 year maximum service, will not have changed in the new illustration compared to your previous one.

Yes, but only by paying Flexiplan AVCs. The 45 year limit includes additional service purchased from Addplan and transfers-in.

Between 1 April 2008 and 31 March 2010, the enhancement is calculated using the additional service periods to age 60 (with part-time adjustments) and using the last 12 reckonable months' full-time equivalent pensionable pay (similar to how this is calculated at present and in order to be consistent with the switch to the Career Salary basis). After 1 April 2010, potential service to 65 would be used instead of potential service to age 60.

Yes. If you leave the Plan before 1 April 2010, when the change to the increased retirement age is implemented, your benefits will be calculated on the basis of a normal retirement age of 60. Deferred pensions will still increase up to retirement, and they will be payable unreduced from age 60.

Remember that benefits earned before 1 April 2008 will also be calculated on the current basis (that is, linked to your final pensionable pay) if you remain in the Plan - and that your pensionable pay when you eventually leave could well be higher than it is now.

If you are considering leaving the Plan, you are strongly advised to consider very carefully and to take professional independent financial advice before making any decision.

If you have left the business and you are over 50, you could take your pension early. Remember, however, that the pension you receive will be reduced by an 'early retirement reduction' for each year it is paid before the normal retirement age of 60. If you have left and want to take your pension, you should contact the Pension Service Centre and apply for early retirement. The Government is however changing the minimum pension age to 55 in 2010.

The change to the minimum retirement pension age will increase from 50 to 55 on 6 April 2010. The increase in the Normal Retirement Age from 60 to 65 will happen on 1 April 2010.

You should receive a letter from the Pension Service Centre 3 months before you reach normal retirement age.

Your contractual retirement age is 65, which means that you can work until you are at least 65. Your Normal Retirement Age (NRA) under the Pension Plan is currently 60 and will increase to 65 for service on and after 1 April 2010. The NRA is the earliest date at which you can collect a pension without your pension being reduced for early payment. Despite the change to NRA on 1 April 2010, you would still be able to retire at 60, but the part of your pension built up after 1 April 2010 will be reduced by an 'early retirement factor' for each year taken before 65. The Trustee determines the early retirement factors to be used.

If you wish to leave the Company before 60 you may be able to draw your pension but it would be reduced by an early retirement factor.

Members can still retire at 60 if they want to, but the part of their pension built up after 1 April 2010, when Normal Retirement Age increases to 65 will be reduced by an 'early retirement factor' for each year taken before the new normal retirement age.

Pre 1 April 2010 pension can be taken without reduction at age 60 and additional career salary benefits can be earned after age 60, whilst remaining in service, and these benefits will be linked to a normal retirement age of 65.

Remember that this change does not affect any pension that members have built up so far and retirement age will not change until 1 April 2010. So the years of membership in the Pension Plan that members have at present are not affected. So, if you only have a few years to go, the difference to you will not be that great.

Age 65 is now the retirement age for employment purposes for all Royal Mail Group employees. But normal pension age under the Pension Plan is currently still 60. Therefore, at age 60, Pension Plan members currently have the following choices:

• Resign from their jobs and take all their pension.
• Continue working for Royal Mail and take all their pension
• Continue working for Royal Mail and continue contributing to their pension, which they can then take at any time.

The Company's decision is that after 1 April 2010, the earliest age you will be able to draw a pension without taking a reduction on service built up after 1 April 2010 will be 65, not 60.You can however choose to take your pre 1 April 2010 pension at age 60 without reduction and continue working and earning more career salary based benefits linked to service after 1 April 2010 and a normal retirement age of 65. You should also note that the maximum number of years' service you can earn under the Royal Mail Pension Plan has recently been extended to 45 years (previously 40 years at normal retirement age).

The current early retirement reduction is around 5% a year; this is a matter for Trustee and is reviewed from time to time by the Plan Actuary. Therefore, it is not possible for an individual to reduce the standard reduction factor since it is considered fair to reduce a pension paid early to compensate for the fact that it will be paid for longer. One way to offset the effect of the reduction is to pay Additional Voluntary Contributions to build up extra pension to cushion the effect of the early retirement reduction. Please note that if you retire at age 60, it is only the pension earned after April 2010 pension that will be reduced.

Under the current arrangements, if a member reaches 40 years service at age 58 and decides to take their pension at that point, then their total pension entitlement would be reduced (by around 10% based on current terms of 5% for each year taken early) to allow for the fact that benefits are being paid before the current normal retirement age of 60. This would still be the case even after 1 April 2010 on benefits earned before 1 April 2010.

The member's benefits would also be reduced in this scenario following the changes, the only difference being that the early retirement reduction applied to the benefits earned from 1 April 2010 would be greater and based on the number of years that retirement was before age 65 (rather than 60 as at present). The overall impact of the changes therefore depends on what proportion of the member's overall service is after 1 April 2010.

The changes also allow pre 1 April 2010 benefits to be taken at age 60 without reduction and for additional career salary benefits to be built up whilst remaining in service.

You should also note that the maximum number of years' service you can earn under the Royal Mail Pension Plan at or after normal retirement age has recently been extended to 45 years (previously 40 years at normal retirement age).

There is no plan to change the accrual rate that determines the amount of pension that a member builds up for each year of service. The key difference going forward is that the part of a member's pension that relates to service after 1 April 2008 will be based on a Career Salary basis from this date, rather than their final pensionable pay, as at present. In addition, any element of pension that relates to service after 1 April 2010 would also be reduced if retirement occurred before age 65.

Members will be able to build up additional benefits if they remain in service beyond age 60. This could help reduce the effect of the changes. Please note that the maximum number of years' service you can earn under the Pension Plan has recently been increased to 45 (previously 40).

No, but you can already pay extra contributions (AVCs) if you want to boost your pension or offset the effect of retiring.

The size of the overall increase in compulsory member contributions needed to leave the Company in the same expected position after the changes may well be more than many members would wish to pay. Based on the Trustee's funding assumptions for the 31 March 2006 actuarial valuation, the reduction in the total employer contributions for the Plan as a whole, arising purely from the increase in NRA to 65 for future service benefits, could (all other things being equal) be around 9% of pensionable pay [could you clarify - a question at the beginning says 4% for NRA change, 4% for CSDB and 1% for closure] . The actual contributions required would need Trustee agreement, however, and the terms could change.

Even if it were agreed that all members pay this extra contribution, the risk the Company still faces is that this level of funding is still not enough to meet the ultimate cost of the current level of pension benefits . This option does not, therefore, address the Company's concern about the level of risk that it is exposed to through the continued provision of defined benefit pensions on current terms.

The use of a single higher rate of member contribution would involve a significant cross-subsidy between members (in addition to that already existing in the Plan). The actual difference in the contribution rate needed to make up the cost between a pension payable from age 60 and that which is payable from age 65 varies by age and sex. For some younger members, the difference is around 5% of pay, but for older members this difference in rate rises to around 10% of pay, or over, depending on the member's circumstances.

If the Company were to make this an option for individual members, then it would either need to set age-related rates of contribution, or run the risk that only the older members of the Plan would elect to pay the higher level of contributions - in this latter case, if the extra rate being paid were too low then further costs would fall on the business.

Reducing salary can affect the level of entitlement to other benefits, such as State benefits, so the implications of introducing salary sacrifice for a plan as large as Royal Mail's are significant. However, Royal Mail has looked at this issue before, as it offers the potential for significant savings to both employees and Royal Mail. However, salary sacrifice for pension benefits is much more complicated than for other payroll related schemes as it involves higher amounts being sacrificed and effectively makes the Plan non-contributory from the perspective of the members. This would not be a desirable message to convey to all parties. It can also be confusing for members and can affect those on lower incomes disproportionately.

The decision to make changes to the RMPP was not taken lightly and the business wants to make sure that everyone clearly understands the problems being faced and for the Company to meet these problems with a small number of clear changes that affect everyone in the same way. Introducing salary sacrifice after the changes have been implemented might be a worthwhile exercise when all the costs, implications and interests of all parties can be properly considered and quantified, since there is scope for significant savings to both employees and Royal Mail if the complexity and associated issues can be overcome. The Company has agreed to investigate this as a possibility after these changes to the Plan have been implemented.

This was discussed as part of the consultation process and the Company decided to make it possible for members who retire at age 60 (or between age 60 and 65) to leave pension accrued after April 2010 (when the retirement age changes to 65) in the Plan and to only draw this when they reach age 65, so that this part of a member's pension is not reduced for early payment.

The changes only allow all (or none) of the pre April 2010 pension to be taken, not part and it is a once only option at any stage from the age of 60. The changes give you the option to take your entire pre April 2010 unreduced pension at 60 should you wish to do so and to take the post April 2010 pension when you wish (subject to a reduction if taken before age 65).

If you are already over age 60 and decide to retire before 1 April 2010, none of your benefits will be reduced on retirement for early payment. If you decide to retire after that date then any part of your benefits that relate to service prior to 1 April 2010 will also not be reduced, even though normal retirement age will have increased to 65 for service on and after 1 April 2010. Therefore, if you're already over age 60, raising the retirement age should only have a very small (if any) impact on your benefits.

Members could pay Additional Voluntary Contributions (AVCs) to increase their benefits. More information is given in your Pension Plan member guide that you can either download from the pensions website at www.royalmail.com/pensions or call the Pensions Helpline on 5456 4545 (Postline) or 0114 241 4545 (external) to get a copy. Addplan contracts in place by 31 March 2008 will be honoured and linked to final salary. A new defined benefit AVC arrangement is being recommended to the Trustee with a view to a re-launch in 2008.

The changes also allow pre 1 April 2010 benefits to be taken at age 60 without reduction and for additional career salary benefits to be built up to age 65, whilst remaining in service.

Yes. Royal Mail's contractual retirement age is 65; it's the Pension Plan that is out of line with employment terms and conditions. When normal retirement age under the Plan is increased, members will still be able to retire at 60, but any benefits earned after the change on 1 April 2010 would be reduced, if taken before age 65.

After age 60 and at any time up to age 65, your options (before the changes are implemented) are as follows:

1. Carry on working and carry on contributing to the Pension Plan.
2. Carry on working and draw your entire pension at the same date. You are not able to continue contributing and building up additional pension for the remaining period of your employment.
3. Stop working and draw your entire pension at the same date. If you have stopped working for Royal Mail you are not able to build up any future pension in the Plan after you leave.

Please note that if you are under age 60, you cannot draw your pension without first leaving service and your pension would be subject to an early retirement reduction to reflect early payment.

After the changes are implemented your options after age 60 will be as follows:

1. Carry on working and carry on contributing to the Pension Plan.
2. Carry on working and draw your pre 1 April 2010 benefits at age 60. You will have a once only option to be able to choose to also continue contributing and building up additional pension for the remaining period of your employment and all your post 1 April 2010 benefits would be payable unreduced at 65. Alternatively you can stop contributing and no further post 2010 benefit will be earned.
3. Carry on working and draw your entire pension at any point. Any pension earned for service before 1 April 2010 would not be reduced. Any pension earned for service after 1 April 2010 would be reduced by an early retirement reduction for the period prior to age 65. You would not be able to make further contributions and build up further pension.
4. Stop working and draw your entire pension at the same date. If you have stopped working for Royal Mail you are not able to build up any future pension in the Plan after you leave.

No, as the business has paid additional contributions to fund redundancy costs and will continue to do so.

The reduction (if any) applies at the date of retirement. The earliest retirement age is currently 50, rising to 55 (under Government changes in 2010). So, the earliest you could retire is 10 years early.

The exact reduction rate is calculated by the Plan Actuary and reflects the fact that a pension paid early will be paid for a longer period. If the pension were not reduced the Plan would be severely out of pocket.