Pension Salary Exchange (PSE) 

 
No. 432/15

 

1st July 2015

 

To: All Branches with Postal Members

 

Pension Salary Exchange (PSE)

 

Since LTB390/15 was issued and the CWU Q&A letter on PSE was sent to members, most of the queries received on PSE have related to the two issues below:

 

Will PSE reduce my basic state pension?

 

No. Royal Mail Pension Plan (RMPP) members are contracted out of the second state pension and as a result pay 10.6% National Insurance (NI) instead of 12%.

 

This means that RMPP members will not be entitled to the full rate of the single tier state pension from April 2016. This is the result of contracting out – it has nothing to do with PSE and the introduction of PSE will make no difference to state pension entitlement for RMPP members.

 

Members of the Royal Mail defined contribution plan (RMDCP) may see a trivial reduction in state second pension, of around 15p a year for each £100 pension contribution exchanged in excess of £15,100 a year. For a RMDCP member paying a 6% pension contribution on earnings of 20k a year, this will produce a reduction of £1.20 a year for the whole life of the second state pension.

 

What are the changes to Terms and Conditions referred to in the documentation issued by management?

 

The only contractual change is to the headline rate of pay, arising from the difference in how pension contributions are made under PSE. There is no other change to Terms & Conditions.

 

Any enquiries on the above LTB should be addressed to the DGS (P) Department.

 

Yours sincerely

Ray Ellis ​

A/Deputy General Secretary (P)​