Understanding your pension plan

How your Royal Mail pension works
3 min 53 sec

How your benefits build up – and how they get paid

The Cash Balance scheme guarantees a minimum cash sum payable at your normal retirement age (which is age 65). It also targets, but does not guarantee, discretionary increases each year that your funds remain in the Cash Balance scheme (whether as an employee member or deferred member).

Your contribution towards your benefits is 6% of your pensionable pay.

You will build up a cash lump sum at a rate set by Royal Mail. Currently, the rate is 19.6% of each year’s pensionable pay with further discretionary increases to the lump sum being targeted each year.

Royal Mail (not the Trustee) sets the policy regarding discretionary increases and may revise it from time.  The policy is currently to target annual increases in excess of inflation as measured by the Consumer Prices Index.

We’ll show you how your Cash Balance fund is building up, in your annual Benefit Illustration.

How do my benefits get paid?

Currently, up to 25% (a quarter) of your Cash Balance benefits can be taken as a tax-free cash sum, with the balance paid to you as cash (taxable as income at your marginal rate). Alternatively, it can be transferred to another registered pension arrangement to provide you with an annuity (in your name) or a drawdown arrangement to pay you a regular income.

If you don’t know which section you’re in, contact the Helpline (contact details are at the bottom of the page); or If you recieve an Annual Benefit Illustration the section is noted on the front page.