BT Scheme C pension

Maisie11

Hello, could someone assist please and please do correct me if I am wrong


I am 55 years old. Been in BT Scheme C (final salary now career average) scheme for 31 years. Salary is £54k.


I have tried to model retirement benefits and am getting confused. It seems to indicate that I can get £100k lump sum tax free and a £15k pension payable NOW or £8.5k lump sum tax free and a £19k pension payable NOW.


Does that sound right please

robin61

I am in scheme B rather than C. But yes you would expect to get a lower pension if you opt for a higher lump sum. You can get a maximum tax free lump sum of 25% of the value of your pension. However you should be able to stipulate the exact amount of lump sum you want as long as it does not exceed the 25%. Obviously the greater the lump sum you take the lower your pension will be.
When you input your retirement date etc on the pension planner there should be a field for lump sum required. Try putting different amounts in there to see what the impact is on your pension. (I assume the planner is similar for scheme C.)

Maisie11

Thank you. It was rather shocking to see how much of a lump sum I would get.. Yes, I did notice my pension would go up if I reduced my lump sum but realistically there is only a difference of £4k a year and instead of £8k lump sum I would get £100k lump sum


There are reasons btw that I am looking at this. So, I can take the £100k and potentially invest and draw down as required?


You are doing well on Scheme B. You must also be near retirement....

Maisie11

Another question. You get another £4k for NOT taking the £100k. I would need to live for over 25 years from now for it NOT to be worthwhile doing? I am 55 now

robin61

Yes hopefully not that long to go. We are the same age actually. This year looks a bit tight but from 2017 it' s looking good if there are some early leaver schemes offered. In the meantime I will continue to make the most of the AVC scheme.

I guess whether you go for a larger lump sum depends on a lot of things such as
Whether you are in good health
Whether you need the lump sum for a specific purpose but you say you will invest it so maybe it would be better to go for the larger pension as it is guaranteed and index linked ?
Other investments you might have

All a gamble on how long you will live. The £100k sounds like it is your maximum lump sum. Maybe you could go for a lump sum in between like about £50k ?

There really isn' t a right or wrong answer it really depends a lot on your personal circumstances and it isn' t an easy decision.

kidmugsy

Maisie11 wrote: »

Another question. You get another £4k for NOT taking the £100k. I would need to live for over 25 years from now for it NOT to be worthwhile doing?

That depends entirely on the inflation rate in the future and on the inflation-protection deal that the pension offers. Can you tell us about the latter? For instance, will you get CPI-linking? CPI-linking capped at 2.5%? Or what?

robin61

Maisie, for your info scheme C is linked to RPI capped at 5%.
However if you choose the pension increase option ( which provides a higher pension initially) only part of your pension will get the RPI increase. You will be able to see the various options on the retirement planner.

kidmugsy

robin61 wrote: »

Maisie, for your info scheme C is linked to RPI capped at 5%.

Then if the future RPI-inflation rate were a steady 5% p.a. (it won't be), the pension would double in approximately 15 years. So the payback would happen well before 25 years.

And, of course, a 55 year-old woman who is of normal health for her age should expect to live far beyond 25 years.