BT Pension AVCs

mpet

A quick question for anyone who has done this (I did call Accenture, but it will be up to 5 working days before I receive a reply!)


I have left BT and have received my pension benefit option forms as a member of pension scheme B. I am happy with my choice of pension, (lump sum and actual pension), but I have £9000 of AVC's with Legal & General that I have to make a decision about.


The 2 options I have on the forms sent to me are to let BTPS 'purchase a pension on the open market on my behalf', or 'arrange my own market option'.


My thinking is that £9k is not going to buy me much of an extra pension/annuity. If I choose the 2nd option, how does this work - do BTPS/Legal & General send me the cash value of the AVC's and leave it to me to invest/purchase my own annuity, or do I have to tell BTPS/Legal and General where I want to move/invest the money.

xylophone

http://www.btpensions.net/182/additional-options-at-retirement

might be worth a look.

robin61

Why don't you just use the AVC to increase your lump sum ? I am going to do that with my AVC when I leave BT. If there is any residual after I have taken the maximum lump sum then I will buy a SIPP with that.

As you say 9k does not buy much of a pension annuity and 75% will be taxable and if you buy a SIPP with it 75% of that is taxable income so neither option makes sense when yo can have the 9k added to your tax free lump sum.

mpet

robin61 wrote: »

Why don't you just use the AVC to increase your lump sum ? I am going to do that with my AVC when I leave BT. If there is any residual after I have taken the maximum lump sum then I will buy a SIPP with that.

As you say 9k does not buy much of a pension annuity and 75% will be taxable and if you buy a SIPP with it 75% of that is taxable income so neither option makes sense when yo can have the 9k added to your tax free lump sum.

The option I chose did not give me that choice. I selected the 'pension increase conversion' which gives a larger overall pension, but part is not index linked. The options that gave the 'maximum tax free cash taken from AVC' were a lower pension value.


I am waiting for a call back, and I know that Accenture can't give me any advice, but I am just trying to understand the process if I chose the 'arrange my own market option'.

xylophone

Have you looked at the link above?

mpet

xylophone wrote: »

Have you looked at the link above?

Yes - but it is quite vague - just saying:


members can transfer their Defined Contribution (DC) benefits (ie AVCs) out of the BT Pension Scheme into one or more different pension registered arrangements.
Different DC pension arrangements will offer different options in relation to the way in which members can take their benefits. These options are likely to include the option to purchase an annuity (i.e. a guaranteed income for life) but may also include other options not offered by the BT Pension Scheme. Different options of taking your DC benefits will have different features, different rates of payment, different charges and different tax implications.

It doesn't actually give details of how the transfer process works.

robin61

mpet wrote: »

The option I chose did not give me that choice. I selected the 'pension increase conversion' which gives a larger overall pension, but part is not index linked. The options that gave the 'maximum tax free cash taken from AVC' were a lower pension value.


I am waiting for a call back, and I know that Accenture can't give me any advice, but I am just trying to understand the process if I chose the 'arrange my own market option'.

It will be a lower pension because that means that you've asked for 25% of your pension pot as a lump sum so it will lower what's left for your pension. You can stipulate what you want your lump sum to be using the AVC as the priority. So if your lump sum is currently say £50K you can tell them you want 59K. That way your lump sum is increased without it reducing your pension. If you still worked for BT you would be able to model this on the pension planner. I suggest you contact Accenture about changing your option.

robin61

So the Option you should pick is.
Maximum tax free cash with pension increase conversion (AVC Priority)
The difference being you restrict the maximum lump sum so basically just add the amount of your AVC onto the lump sum you are expecting currently and that should be the lump sum you stipulate that you want.

I have just tried this on the pension planner and it definitely has the effect of increasing the lump sum by 9K without impacting the pension.

I actually think that BT is not that good at making this option very clear but for you it is definitely the right way to go. If you take the AVC any other way it's like giving the tax man a gift !

Congratulations on making your escape by the way.

madeinireland_2

They are also not very good at telling you all the available options if you are in the section b scheme.

You can also transfer your lump sum to increase your pension if you want but that's not shown as an option.

robin61

madeinireland wrote: »

They are also not very good at telling you all the available options if you are in the section b scheme.

You can also transfer your lump sum to increase your pension if you want but that's not shown as an option.

Yes not even an option on the pension planner but definately there buried in the scheme B pension booklet.

mpet

Robin61 - makes perfect sense the way you have explained it- stupidly, I overlooked the fact I could change the lump sum value - totally my own fault!

The problem I now have is that accenture state they will only supply deferred benefits statements once every six months. I was hoping to take my pension at the end of June. Not sure if there will be any way around this other than wait.