BT Pension S2P offset

oldus_gittus

So what does the statement " To make sure you do not receive this benefit twice " mean then ?

xylophone

The proposed reduction by BTPS would not occur until NSPA - as I read it, BTPS pays (and inflation links) the full pension until NSPA when it would apply the "offset" to account for the fact that a certain element (the post 2009 S2P) would be paid within the state pension - thus the pensioner's total pension does not decrease.

Let's take the example of a BT employee who will leave the job (after say forty years) and draw his pension at age 60 in 2017.

The DWP will provide the figure for his Foundation Amount at 6.4. 16.

This amount will take account of both his contracted in (post 2009) and contracted out years - therefore it could well be over the current basic state pension even after the contracted out deduction has been made - if below the rate of NSP, the employee will be able to increase the amount because he will work an extra year up to age 60.

He could also choose to make voluntary contributions to bring himself up to full NSP.

Until he draws his state pension, the BT pension will be paid in full by BTPS - once the state pension comes into payment, BTPS will decrease the pension by the "offset" because this amount will be being paid within the state pension.

However, the pensioner in question will have earned a GMP and this is where the situation becomes complicated.

At NSPA, the part of his BTP that relates to his GMP should be split out from the total.

As matters stand at the moment, the BTPS has no obligation to inflation link the pre 88 GMP or anything above 3% on the post 88 GMP.

The mechanism for inflation linking the GMP through the state pension will disappear with NSP.

It is conceivable therefore that the pensioner would find that after NSPA, a part of his BT pension will be non increasing/not fully inflation linked.

This might be obviated by the Scheme's continuing to fully inflation link the pension as it would have been doing up to NSPA.

smjxm09

Sorry there are too many abbreviations there to fully understand what you are saying but thanks for taking the time to reply.

BTPS= BT Pension
NSPA = National State Pension Age
DWP = Department of Works and Pension
NSP = ?
GMP = ?

I just need to keep things simple and keep to the bare facts.
I was contracted out by BT which saved me just over 1% of NI which was was a negligible sum. That saving has cost me £24 per week for the rest of my life from the day I draw a state pension.

Not content with that when I was contracted back in and paid the higher contribution I will not actually see any of the extra money as BT will in effect take it off me. It doesn't wash, if I understand what you are saying, that BT are actually paying this extra money up until my state pension age when the state takes over.

The state pension of £155.25 has been reduced to £131.50 for contracted out years and then it is further reduced for the offset and then my combined pension is taxed at 20% above the personal allowance so for me that is the entire state pension that will be taxed.

So is this what the Government planned to happen to its flagship £155.25 pension as ultimately I seem to be going to see very little of it with my contracted in and out years plus tax.

ColinJB

Too many abbreviations for me too. Just like being back on BT. I don't know what to expect when I reach 65 in 2019. I left BT in 1992 after 22 years in the job. My pension was frozen until I was 60 because I was under 40 (38) when I left. I received my BT pension at the beginning of last year but have continued working ever since I left BT and have 45 yrs of pension contributions in (its always amazed me that you have to have over 30 years of contributions to qualify for full state pension yet you have to continue to pay them once you have reached the max). Does anyone know how it will affect me and others who left BT back in the 90's?

chris_m

Surely the New State Pension (NSP) includes what is currently the Basic State Pension and the 2nd State Pension (S2P), effectively combining the two as a single sum, albeit with other calculations taken into account?

The NSP will be reduced for the period that one was contracted out, just as is the potential maximum (had one never been contracted out) S2P at present, i.e. just the S2P part of the NSP would be reduced.

When the NSP goes into payment, the BT Pension will then be reduced by an amount that correlates with the S2P part that remains in the NSP, because that amount will be paid as part of the NSP, as happens with the current Basic State Pension and S2P arrangements.

Or am I looking at this too simply?

DaveMcG

I think the £155 figure is a red herring. If the scheme had continued to be contracted out you still wouldn't get £155. It has nothing to do with your situation.

Presumably the scheme kept the same accrual rate when it ceased to be contracted out? If they didn't apply the reduction at SPA, the scheme benefits would have been increased not maintained. I imagine the scheme actuaries calculated that it was cheaper for the employer to pay increased NI than fund the portion of benefits equivalent to S2P.

For you all that has apparently happened is that before the change you would have been getting no S2P and all scheme benefits and for the relevant years after the change you are getting S2P and slightly less scheme benefits.

smjxm09

You can go to [FONT=&quot]https://www.tax.service.gov.uk/checkmystatepension to find out how much state pension you will get. It takes about 5 minutes to get an answer but that sum could well be taxed if your income for other pensions etc takes you above your personal allowance.[/FONT]

RickyB2000

As I would understand it, you would be awarded a BT pension of X as per your salary. When contracted out, you BT pension became X + Y were Y is the equivalent reduction in you state pension for the period opted out. When opted back in again, your BT pension would be reduced back to X and your state pension would be increased back up by Y for this period. However, your pension statements were not updated, and continued to forecast X + Y for the full time. So for the period opted out you get X + Y from BT and a state pension of Z - Y and for the period opted in you get X from BT and state pension of Z.

So I think you get your BT pension of X regardless, it is simply were Y is coming from (the state or the BT pension pot). You should be in the same position regardless. Of course, you would need a breakdown of all the figures to properly understand if you are worse off, as it is possible that BT offered a more generous than Y as extra pension so when you contracted back in you did lose a better benefit. You may also be better off

neilvw

ColinJB wrote: »

(its always amazed me that you have to have over 30 years of contributions to qualify for full state pension yet you have to continue to pay them once you have reached the max).

Recent National Insurance contributions entitle you to other contribution-based benefits such as Jobseeker's Allowance (C) and Employment and Support Allowance (C). These have less strict means tests than the income-related versions. For example, a person can get them even if his/her partner works full-time.

xylophone

NSPA - "new state pension" age.

GMP - Guaranteed Minimum Pension (for those in contracted out schemes between 1978 and 1997.

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

The GMP is also covered in the BTPS Scheme Booklets. See http://www.btpensions.net/