Early retirement at 55...help please

ExBT_Bob

% Reduction -


Pre Apr 09 Service:
55 - 24.9
56 - 20.6
57 - 16
58 - 11.1
59 - 5.8
60 - 0


Post Apr 09 Service:
55 - 44.4
56 - 41.3
57 - 38
58 - 34.4
59 - 30.6
60 - 26.4
...up to 65 - 0!

juju17

Thanks for the advice ExBT Bob, much appreciated.
I think I need to get DH to call back to Accenture to find out the figures for deferring to 60, so that we can compare these to the 55 figures. Like others have said it is unhelpful that the figures generated from the portal show retirement at 65.
How do BT advise employees they can apply for early release?....do they send out details in emails?...to the areas of the business they wish to target?.....I am asking as I wondered how the company do it, as DH tells me that his sector are recruiting!!, and he has heard nothing about early release in his sector.....he is aware of colleagues in other fields applying.
So I very much doubt he would get an early release.
Was hoping that he was going to get on the [EMAIL="w@w"]w@w[/EMAIL] seminar later this month, but he cant get on that as they are all full!....so have to wait for a place on a future one.

Mr_Prudent

Hi Robin61 Looks as if you and I are thinking along very similar lines, to take the pension a little earlier and invest the years of earlier payments and lump sum. I cannot see the point of waiting until actuarial reduction hits zero on the vast proportion of your pension in the hope that twenty years later when you’re fast approaching your eighties (if you make it that far) that index linking will give you a larger pension (dependent on CPI inflation) Who knows, if you have invested those early payments wisely you may well end up in a better position. Also don’t forget you should be receiving your state pension from your middish sixties. How much does an eighty odd year old need to live on!
That said I do appreciate that everybody has different circumstances and I am not going to criticise anybody who has a different plan in their mind.

ExBT_Bob

juju17 wrote: »

Thanks for the advice ExBT Bob, much appreciated.
I think I need to get DH to call back to Accenture to find out the figures for deferring to 60, so that we can compare these to the 55 figures. Like others have said it is unhelpful that the figures generated from the portal show retirement at 65.
How do BT advise employees they can apply for early release?....do they send out details in emails?...to the areas of the business they wish to target?.....I am asking as I wondered how the company do it, as DH tells me that his sector are recruiting!!, and he has heard nothing about early release in his sector.....he is aware of colleagues in other fields applying.
So I very much doubt he would get an early release.
Was hoping that he was going to get on the w@w seminar later this month, but he cant get on that as they are all full!....so have to wait for a place on a future one.

Whatever the figure you'll be looking at a 25% reduction in pension so say he would have received £20k/yr pension at 60, you'll be looking at £15k instead. Bear in mind that spouse benefits are 50% of that. You'll also get CPI on 15K instead of 20K. If you assume 2% CPI for 5yrs that makes the £15k to £16236 and the £20K to £21649. Higher CPI makes the difference even greater, as does time.

Each line of business sorts out their own scheme and will brief all staff in that unit when/if one becomes available with the appropriate terms and conditions

tigerspill

robin61 wrote: »

Right I see that now. They don't appear to mention that in the AVC booklet. However if you do this only 25% will be tax free the rest is going to be taxable via an annuity or SIPP. I think most people who are investing in this plan to use it to boost their tax free lump sum without impacting their pension. But I guess it is an option and could presumably be used within a SIPP to fund early retirement and delay taking the pension to avoid the actuarial reduction. Although only an annuity is mentioned as an option one of the other questions does say SIPPs can also be used.

Hi Robin61,
I am in the same BT pension.
So by my reading - if we can get the AVC part of the BTPS up to 25% (NOT over) then we can take the WHOLE AVC fund tax free?
I am not sure where the annuity part comes in? I personally don't want to go the annuity route).
Am I missing something?to sure where the SIPP aspect comes in?

tigerspill

robin61 wrote: »

Yes that is my understanding. My strategy is to take the AVC and the main pension at the same time and use the AVC to fund the maximum possible tax free lump sum. That way I can do this without having to forego any pension to fund it.
If you take the AVC earlier than the main pension you have to do it via a SIPP or buy an Annuity with it. So you are only going to get 25% 0f the value of the AVC tax free. You also have to take the whole AVC if you take it earlier.

Sorry for another post
Are you saying that in the BT scheme you CANT take the AVC tax free limp sum (up to 25%) as tax free cash? Why would we have to put it in a SIPP or Annuity.

This stuff hurts my brain yet it is so important in making planning decisions. I just want to be 100% sure of my info. Hope you don't mind the questions.

tigerspill

madeinireland wrote: »

You can calculate it but it's not an easy calculation. The pension team can send you a table showing the actuary reduction per year which you can use for that. They don't like to give you it for some reason and it does change from time to time. The benefit of deferment drops off a cliff after 60 as most of our pension is pre 2009 which has no actuary reduction from 60. Inflation comes into it as well of course.

Is the actuarial reduction for the "new" post 2009 part not around 6% per year? Do collecting the pension at 60 required five years reduction of the "new" part - i.e. 30%?

tigerspill

ExBT_Bob wrote: »

So my advice would be to try for a release scheme, take any leaver payment up to £30k as it's tax-free (redundancy). Direct any surplus to your BT AVC so that it's sheltered from tax. Move your BT AVC to a SIPP (it's free to move) and then under the new rules you can get most if not all of your leaver payment out and previous BT AVC savings tax free, depending on your taxable earnings of course. During this time you can leave your main BT pension benefits untouched. Try to avoid the horrific actuarial reductions at all costs if you're under 60 by living off other savings/earnings if possible.
At your hubbies age he would see a 25% reduction on his pre April 2009 and 44% reduction on his post-April 2009 pension. That's a huge reduction and for life!

I dont understand why you would move the AVCs to a SIPP?
As long as your AVC is under 25% of the full BT Pension, then you can take it all tax free.
If you move it from the AVC to a SIPP, then you can only withdraw 25% of the SIPP tax free.
Unless you mean take the AVC as tax free cash and then re-invest it in a SIPP?

tigerspill

ExBT_Bob wrote: »

% Reduction -


Pre Apr 09 Service:
55 - 24.9
56 - 20.6
57 - 16
58 - 11.1
59 - 5.8
60 - 0


Post Apr 09 Service:
55 - 44.4
56 - 41.3
57 - 38
58 - 34.4
59 - 30.6
60 - 26.4
...up to 65 - 0!

Thanks for this. Are these the formal figures from BT?
Can they change or are they fixed?

juju17

Thanks ExBT Bob, I was working on the rough calculations of about 25% reduction for the 5 years ...I,e 5% per year.