BT Pension Index Linking

martinp55

With the news that we are for sure in a world that has inflation, I wonder if the likes of BT are going to gives us an index linking rise in 2010. In Sept 2009 when the RPI is looked at of course it was negative - not a real situation due to vat rate changes etc. State Pensions have been given a small rise - Does anyone have any information?

Andy_L

You will receive septembers RPI, but with a minimum of 0 (ie no reduction as RPI was negative), as that is what the contract says

jh2009

The increase is measured using the difference between the previous Septembers. So the 2010 increase will be the difference between Sept 2009 and Sept 2008, which was -1.4%. Most Schemes though will just freeze the pensions payable that year (unless the pension in payment has any sort of minimum or fixed guaranteed pension increase).

Of course its confusing when a 0% increase is announced to pension scheme members if the headline inflation rate is 3.5%, but the increases have to follow the scheme rules (which will specify the september rule above).

Schemes can choose to provide a discretionary increase in addition to that provided by the Rules, but given the economic uncertainty/volatility over the last year or so, and pressures on company/scheme funding i'd be surprised if many schemes would consider it a good time to consider doing something like this.

Andy_L

Over the long term I suspect its swings & roundabouts. Sometimes the September RPI figure will be higher than other months & sometimes less

RegJ

So the 2011 increase will be the difference between Sept 2009 (which was -1.4%) and Sept 2010 (which is 4.6%) that makes 6% by my reckoning.Or am I way off guys...

chris_m

Depends which scheme section I think - section C is capped at 5% IIRC, don't know about sections A & B.

hugheskevi

So the 2011 increase will be the difference between Sept 2009 (which was -1.4%) and Sept 2010 (which is 4.6%) that makes 6% by my reckoning.Or am I way off guys...

-1.4% is the change in RPI between Sept 2008 and Sept 2009, so isn't relevant for this year.

4.6% is the change in RPI between Sept 2009 and Sept 2010.

But, it is unclear about what index BT will use to index pensions following the change in public sector pensions indexation to CPI, as well as the change to statutory minimum revaluation/indexation of private sector pensions, which may affect the BT scheme. Looking at a recent (ish) Press Release it says:

We believe that the recent announcement by the Minister of Pensions on the change to CPI for the indexation of pensions may lead to a reduction in the liabilities of the BT Pension Scheme. We are reviewing this in detail with our legal and actuarial advisers, and discussing it with the Trustee.

If the scheme were to apply CPI uprating rather than RPI, that would be a 3.1% increase, in the absence of any uprating caps applying.

mjm3346

hugheskevi wrote: »

-1.4% is the change in RPI between Sept 2008 and Sept 2009, so isn't relevant for this year.

4.6% is the change in RPI between Sept 2009 and Sept 2010.

True but as 0% was applied when it was -1.4% could they now look to recover that "overpayment" and so pay 3.1% (which by chance is the same as CPI)

barbelhunter

Seems a lot of mis-information kicking about here to me. Unless you can say for sure (100%) that this is wrong then here is how it is:-

Section A/B Pensions grow by RPI each April. The RPI figure used is that of the previous September - ie for this coming April you will see a 4.6% pay rise.

BT Pensions are not public sector pensions so I do not see why people think they will start to follow CPI instead of RPI. The rules are clear and easy to find on the internet if you dont have them already.

Thanks

hugheskevi

Scheme rules (page 22) for section A/B:

Any pension in payment will be increased from time to time in accordance with:

• the Pensions (Increase) Act 1971, and;
• Sections 59 and 59A of the Social Security Pensions Act 1975

as if the pension was payable under the PCSPS. "Pension" has the same meaning in this paragraph as in the Pensions (Increase) Act 1971.

My reading of this is that the indexation of the BT pension scheme is the same as the Principle Civil Service Pension Scheme.

traineepensioner

barbelhunter wrote: »

Section A/B Pensions grow by RPI each April. The RPI figure used is that of the previous September - ie for this coming April you will see a 4.6% pay rise.

You are quite right that, currently, the BT A/B pensions grow by RPI. However, like a lot of pension scheme increases, this is not cast in stone.

The current BTPS scheme rules state that : "10.2 Any pension in payment will be increased from time to time in accordance with :
The pension increase act of 1972 and sections 59 & 59A of the social security act of 1975
...as if it were paid under the Principle Civil Service Pension scheme 1974 (and any amendment or replacement of that scheme)"

This doesn't guarantee that the pension increases will remain at RPI....far from it.

BT are looking to reduce their pension liability even further than the last pension review. From a BT press release on their lastest results "We believe that the recent announcement by the Minister of Pensions on the change to CPI for the indexation of pensions may lead to a reduction in the liabilities of the BT Pension Scheme. We are reviewing this in detail with our legal and actuarial advisers, and discussing it with the Trustee." link from hugheskevi (thanks)

Very few (any?) of the BT directors have their own pensions with the BTPS, so I guess it's fair game....again.:mad:

Trainee pensioner

...sorry just seen hugheskevi's reply...shorter and to the point.