BT Pension options: opinions please
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[FONT=Verdana, sans-serif]The commutation rate on option 1 seems much better at 28.5 that that on option 2 at 23.2 unless my maths is out.[/FONT]0
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I would only take the higher lump sum and lower pension if I had a specific need for the cash. You don't appear to.
With the BTPS scheme B which it looks like you are in you also have a half way house i.e. you don't have to take either the standard lump sum or the maximum lump sum you can ask to take something in-between the two.0 -
Simple_Soul wrote: »Dear Linton, thanks for your comment & I take your point.
As far as I know, there is no cap. But that is not to say BT won't put one on in future, just as they switched from RPI to CPI (even for existing pensioners).
Also, the inverse commutation rate is nearly 30:1. (£30 TFLS for £1 p.a. pension.) Isn't that very poor? I don't really know.
And then there's the tax; I would be going from a tax free lump sum to a taxed pension.
Having said that, so far there are 3 people in favour of the higher pension, one in favour of the higher TFLS, & one for the middle standard option.
The higher pension was my least favourite option, but now I am seriously considering it.
There isn't a cap on scheme B. I doubt BT could apply a cap and apply it to service already built up in scheme B. It's not part of the current consultation either.0 -
Sorry, I've changed the option numbers around to illustrate my point:
Options:
1. £17,478 p.a. gross + £0 TFLS
2. £15,816 p.a. gross, + £47,448 TFLS
3. £13,583 p.a. gross + £90,554 TFLS
Looking at the difference between them:
1: £17,478 p.a. gross + £0 TFLS
1 & 2: -£1662 p.a. + £47,448 TFLS (28.5x)
2 & 3: -£2233 p.a. + £43,106 TFLS (19.3x)
So it appears that to get an extra £43k you're sacrificing £2.23k/year, a multiple of 19.3x, whereas to get £47k you only sacrifice £1.66k/year, a multiple of 28.5x.
The biggest lump sum is a bad deal compared to the middle lump sum as you're sacrificing much more per year for the extra.
The biggest lump sum is therefore likely to be a bad option in my opinion.0 -
The biggest lump sum is therefore likely to be a bad option in my opinion.
Agreed. Depending on how much the OP proposes to spend on car and housing, and depending on how big a cushion of capital he'd like, to provide security and comfort, then option 2 might well appeal.
CORRECTION. Darn it! I meant that Option 1 - the standard pension + lump sum combination - might appeal.Free the dunston one next time too.0 -
Because of the uncertainties of Brexit, I decided to keep the full index linking when I made my choices in 2016. I'm glad I did. Inflation is on the rise. I chose a high lump sum because my partner has little pension provision. I took advantage of AVCs too which helped me increase lump sum and pension. I saw my tax payments shrink as I was paying AVCs which was pleasing.
Did you not go to a pensions seminar?0 -
Because of the uncertainties of Brexit, I decided to keep the full index linking when I made my choices in 2016. I'm glad I did. Inflation is on the rise. I chose a high lump sum because my partner has little pension provision. I took advantage of AVCs too which helped me increase lump sum and pension. I saw my tax payments shrink as I was paying AVCs which was pleasing.
Did you not go to a pensions seminar?
I like the fact that in scheme B the increases are not capped. It was a bit of a blow when they changed it from RPI to CPI though. As always it's a gamble on how long you will live but i feel that having a decent pension linked to inflation allows me to be a bit more adventurous than I would be otherwise with other investments.
You are right the AVC is a superb way of increasing the lump sum rather than reducing the pension. Too late for the OP if he hasn't already done it unfortunately. And yes it's pleasing to see a big reduction in both tax and NI.0 -
Hi, thanks for replying.Because of the uncertainties of Brexit, I decided to keep the full index linking when I made my choices in 2016. I'm glad I did. Inflation is on the rise. I chose a high lump sum because my partner has little pension provision. I took advantage of AVCs too which helped me increase lump sum and pension. I saw my tax payments shrink as I was paying AVCs which was pleasing.
Did you not go to a pensions seminar?
In BT I don't think we are given the choice to keep "the full index linking". If I could I most certainly would. At the time, rightly or wrongly, I chose to subscribe to sharesaves rather than AVCs, and it is too late to do anything about that now.
I stopped working 10 years ago (I have been living off savings since then) so I missed out on pensions seminars.0 -
Simple_Soul wrote: »Hi, thanks for replying.
In BT I don't think we are given the choice to keep "the full index linking". If I could I most certainly would. At the time, rightly or wrongly, I chose to subscribe to sharesaves rather than AVCs, and it is too late to do anything about that now.
I stopped working 10 years ago (I have been living off savings since then) so I missed out on pensions seminars.
You can definitely have your full pension linked to CPI. That's your standard option.
To have a partially index linked pension you have to opt for the Pension Increase Conversion. Here you can choose to give up future pension increases on the part of your pension built up before 6 April 1997 in exchange for a pension starting at a higher level but with no increases. When you get your options from Accenture it will show you what proportion is index linked and what is not.
You can't put into the AVC once you have left BT. So you are right it's unfortunately too late now.0 -
You can definitely have your full pension linked to CPI. That's your standard option.
To have a partially index linked pension you have to opt for the Pension Increase Conversion. Here you can choose to give up future pension increases on the part of your pension built up before 6 April 1997 in exchange for a pension starting at a higher level but with no increases. When you get your options from Accenture it will show you what proportion is index linked and what is not.
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Sorry, I misunderstood Michael L's comment.
By "full index linking" I thought he meant RPI linking as opposed to CPI linking.
I have already got my options from Accenture and I have no intention of choosing a non-increasing pension.0
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