BT pension- Aged 57, take it now or defer?

marlot

One factor people often forget is tax. You pay 20% tax on earnings over about £10k - so you might as well get the three years of paying tax on only the bit over your personal allowance.

(This assumes you have no other income - I don't know how much of your savings above are in ISAs)

smjxm09

Personal allowance will be £10,600 from April so my pension of £12,697 would be taxed at £418.40 per year leaving me with a monthly pension after tax of £1023. Not enough to live on but by drawing on savings each month I think I would be good for 40 years. From April £148,000 will be in ISA's.

ExBT_Bob

smjxm09 wrote: »

Key facts:


I left BT on 31st December 2014. Pension would have been £12,695.79 if pension started that day.

If I had left one month later on 31st January 2015 Pension would have been £12,799.29 if pension started that day. By the end of May the pension would have been £13,165. I understood that before I decided to leave.

I have asked to take my pension on January 10th 2015 and have the forms to sign. If I don’t sign them I can’t apply for another 6 months.

Pre-2009 final salary service 31 years 220 days
Post 2009 CARE service 5 years 9 months
Section B member


Those extra 10 days from January 1st are worth £1.52 per year while if I left one month later I would have got an extra £103.50 per year.

I have read posts from BT people who have left or are thinking about leaving saying that it is a good idea to defer the pension until 60, which is the termination date for the final salary part of the pension while the CARE part would have to be taken 5 years early.

I just can’t see it as the pension increase once left is minimal by deferring it. Am I missing something as by taking it now I will have banked around £28,568

Firstly with BT Pensions how many people think that the BT Pensions website is hopeless, useless and out of date?

Aside from that you commented about your pension increase once left is minimal. That's not quite true although I appreciate that CPI is minimal at present. The April increase in BT Pensions (A&B) will be only 1.2% (if they have been in payment for a full year). Deferred pensions increase in the same way.
But what you have missed is that when you're another year older it will increase by CPI + 'less' actuarial reduction (around 4.9% from 57-58 on your pre Apr 2009 and 3.6% on your post-Apr 2009 pension). If you take the hit with the actuarial reduction, each CPI increase is on your lower pension for the rest of your life.

The actuarial reductions were amended in 2013 as per the previous post above. UPDATE** They have been amended again in October 2015, with less of a reduction each year**

You've contributed for such a long period, why let them take such a chunk from you with just 3yrs to go (for a 0% reduction on your pre Apr 2009 service)? Unless you were in a financial emergency (which you clearly aren't) I would never recommend it.

I'll be leaving mine deferred until 60 as the majority of my service was pre Apr2009 - I'm not letting the b*****s get away with it - we've already been screwed by the RPI to CPI change!

NB the extra pension quoted for leaving later (end Jan or End May) is just associated with the increase in pensionable service (had you stayed longer) .

Mr_Prudent

Hi smjxm09.
Sounds like your situation is very similar to robin61 and me. I am 98% sure I’m going to take my pension early as well, although don’t forget that the reduction will apply to any TFLS that you decide to take. I did toy with the idea of no lump sum at all in exchange for a larger pension but I don’t think the commutation rate is that great and of course you will give up the tax free element. When all is said and done I don’t think there’s a lot in it whatever you decide to do, although those who have more expertise then me would beg to differ. Just do what “feels right” for you and your family.

Mr_Prudent

Hi ExBTBob. I totally agree with your comment regarding the website. I have asked them when the portal will be available to deferred members as it was hinted that this may be the case in the future, but I think the difficulty is that it is accessed via BT’s intranet, although I would have thought that this could be sorted with little effort. For a large telecoms pension fund they to seem to struggle with....well communication! I have heard of horror stories if you call them and are put through to India.

smjxm09

Another thing which I can't get my head around is the contracted out part of the State Second Pension which is being merged into the new state pension from next year. Because we were contracted out we will get less state pension. I think for me it will be around £14 per week less. I was sent the figures but can't lay my hands on them now.

The following comment that has appeared in my pension paperwork implies I will actually get less BT pension.

From 6 April 2009 the BT Pension Scheme ceased to contract-out of the State Second Pension (S2P) and as a result you are expected to receive additional State pension from your State Pension Age (SPA). Your BT pension will be reduced at your State pension age by a corresponding amount reflecting the additional State pension that is payable. The amount of the reduction is currently £435.86 per year

So BT are going to cut my pension due to me getting part of my State Second Pension so this part of the State pension is actually worthless?

kidmugsy

smjxm09 wrote: »

So BT are going to cut my pension due to me getting part of my State Second Pension so this part of the State pension is actually worthless?

You surely don't expect to get paid twice for the bit of your National Insurance contributions that was contracted out? The money went instead into your BT pension scheme.

kidmugsy

smjxm09 wrote: »

I left BT on 31st December 2014.

Then I suggest that you take a heap of your cash and contribute to the maximum permitted extent to a Personal Pension of some kind. If you've stopped work, this is the last tax year when you can get a large amount in in one go. (i) You get the advantage of the tax rebate being added to your fund, even on the bit of your income on which you paid no tax in the first place, (ii) the fund remains available to you on flexible terms (since you are over 55), and (iii) the fund will avoid Inheritance Tax when you turn up your toes. These three make it an excellent deal.

In 2015-16 and thereafter, you could also contribute £2880 net p.a., giving you more of the same advantages.



P.S. I must say much of your cash is earning well.

smjxm09

You surely don't expect to get paid twice for the bit of your National Insurance contributions that was contracted out? The money went instead into your BT pension scheme.

I don't think I was given an option to remain contracted in. If I was then I would still have not have taken it, as I would not have known the consequences in later life. I think it might of had more to do with BT saving money. Also not sure the NI I saved, which would have not been a great deal is compensation for a reduced state pension.

smjxm09

Then I suggest that you take a heap of your cash and contribute to the maximum permitted extent to a Personal Pension of some kind.

Thanks, I have already hammered my AVC's to such an extent that my taxable pay to date is under £2,000 and I have almost maxed out the 25% rule with my AVC and lump sum.

That spare £8000 personal allowance should cover my pension payments if I decide to take them now and all of the interest on my taxable savings for this year.