BT Pension & AVC lump sum

ermine

tigerspill wrote: »

I have seen GMP mentioned on a number of threads. Can someone explain what it is and how it can impact a pension? Thanks.

GIYF

http://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

Nobody said it was simple!

Kevin_H_2

I do not know If its right to add this here? New to this, I have just phoned BT Pensions to get a CETV. and the want to charge me £900 is the right?

kidmugsy

madeinireland wrote: »

Have you considered switching your AVC part of the pension to a new SIPP and then going into flexible drawdown as you won't have to buy an annuity then - but this does assume you have £20k pension from your basic pension - but I think you can buy a small annuity to make that up if you need to.

A note to newcomers: madeinireland's comment was posted before the 2014 Budget. You can now ignore the £20k p.a.: anyone over 55 can do drawdown without constraint.

RichandJ

Kevin_H wrote: »

I do not know If its right to add this here? New to this, I have just phoned BT Pensions to get a CETV. and the want to charge me £900 is the right?

It depends.

Have you had a TV within the last 12 months ?

Are you within 1 year of your normal retirement date under the scheme rules ?

Although £900 seems a bit high in either case.

Or, 3rd thought, is this anything to do with divorce ?

arrghgarry

Hello,many years ago I asked about adding to my pension fund ,the woman was adamant it could not be done

arrghgarry

what does that mean

tigerspill

I am with BT and thought that if you took your AVC at the same time you started collecting your pension - you could take the cash tax free. But if you took the AVC in advance, you had to put in a SIPP or Annuity.

madeinireland_2

Tigerspill - you are correct.

I intend to take a scheme and leave soon. Then when I am 60 I will convert some of my pension lump sum into more pension and take the rest including AVC's out tax free.

I think the conversion rate you get depends on the age at which you do the conversion. My calculations (following guidance from the pension people a few years ago so may be out of date) is that you get about £49 per £1000 converted at the age of 60.

I think you need to be careful with the guidance they give you sometimes as I don't think they all understand all the rules themselves. I have a considerable amount of AVC's which if I combined with my pension lump sum would exceed 25% - hence the trick to convert some of my pension lump sum to more pension to allow me to withdraw all the remainder as tax free lump sum. The pensions people could not understand that - but eventually I got to someone who understood and agreed it could be done.

Take care and good luck...

oldus_gittus

I took my BT pension at 60 last August after 7 years in deferment and received £45.82 for each £1000 of lump sum converted to extra pension. This was a " single life " quote . It is slightly less for " joint life " .

robin61

I agree with madeinireland's comments about some of the advice given by Accenture. I've just been looking into options for residual AVC after taking the max tax free lump sum with AVC as priority.

I had previously been advised by Accenture that the residual sum could be transferred into a SIPP. This now turns out not to be correct. You can only transfer the whole of the AVC fund to a SIPP.

The latest advice I have from Accenture for the residual AVC fund is as follows.

1) If less than £5K I can buy extra pension in the BT Scheme
2) If more than £5K an annuity on the open market
3) If more than 5K you can take a taxable lump sum but it will be considered an uncrystalised lump sum payment and taxes at something like 50%

As suggested by madeinireland I can buy additional BT pension with a proportion of my standard lump sum on the element built up prior to 2009 and then use the AVC to fill the lump sum gap by stipulating the max lump sum with AVC as priority. You can't model this on the planner but you can ask Accenture for a quotation when you know your retirement date.

They did a quick and dirty calculation for me with a retirement date of 05/01/17 (age 56) and they quoted me £33.57 per thousand for joint life with my spouse. So although that doesn't seem particularly generous I'd suggest it probably beats what I would get if I were to buy an increasing annuity on joint lives. So this would seem to me to be a better option. Obviously the younger you are the less generous the conversion rates and it also reduces if you want a spouse's pension on the increased element.