The Royal Mail Pension schemes and Pension Sharing

Current and previous Royal Mail or Post Office employees may have accrued pension benefits in two different pension schemes.

By Rahim Rashid - April 2023


Pension benefits in the Royal Mail Statutory Pension Scheme (RMSPS) relate to pensionable service prior to 1 April 2012.  Service from 1 April 2012 will have resulted in pension benefits being accrued in the current Royal Mail Pension Plan (RMPP).

Prior to 1 April 2012, there was only one scheme (the RMPP). The establishment of the RMSPS relates to the privatisation of the Royal Mail.  The scheme was set up so that the assets (of over £20 billion) and liabilities of the RMPP, as at 1 April 2012, could be absorbed by the Government prior to sale of Royal Mail shares.

The RMSPS is an unfunded scheme.  That is, like many public sector pension arrangements, there are no assets earmarked to be used to meet the scheme liabilities.  (The assets that were transferred to the Exchequer were used to pay off national debt.)  In contrast, the RMPP is a funded private sector pension arrangement.

Up until the middle of 2022, if a Royal Mail pension (i.e. a RMSPS or RMPP pension) was made subject to a Pension Sharing Order, the mechanics of pension sharing were the same for each scheme, despite one scheme being funded and the other being unfunded.  The transferee would receive a pension credit equal to the percentage specified in the Order multiplied by the pension’s Cash Equivalent Value (CEV).  This pension credit would then be transferred out of the scheme into an arrangement of the transferee’s choice (typically a defined contribution arrangement) to provide pension benefits in retirement.  This is known as external implementation.

There has been a change in policy that only affects the unfunded RMSPS.  Now—in line with the policy for unfunded public sector pension schemes—when a RMSPS is made subject to a Pension Sharing Order, the resulting pension credit is converted to a RMSPS pension in the name of the transferee.  That is, the pension credit can no longer be externally implemented, it has to be internally implemented.

The amount of RMSPS pension awarded for a given amount of pension credit is determined by the Government Actuary’s Department (GAD). Capita, who have administered the RMSPS since 2018, can provide a quotation of the amount of RMSPS pension that may be awarded for a given amount of pension credit, when provided with the transferee’s date of birth.  However, provision of such a quotation is chargeable.

To reduce costs for the divorcing parties, we have acquired from GAD the factors used in the provision of internal implementation quotes.  This means that we can calculate what one party may forgo and what the other party may be awarded on sharing of a RMSPS pension without having to request an quote from Capita, saving both time and money.

Rahim Rashid
Principal Report Writer

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