BT deferred Pension Section B

Anne_BT

Why must I take my BT Pension (deferred Section at age 60 when my official retirement age is 66. I will be working full time for another 3 years minimum but as a basic tax rate payer the BT Pension will take me into the higher tax band. I have asked BT Pensions if I can defer until age 63 but they say NO without any reason. My other pensions allow me to defer. I left BT in 1994 after 17 years employment.

PensionTech

It's just not an option under some schemes. All defined benefit schemes have their own rules. They are all designed to pay you a defined amount of income from a defined age. Any additional flexibility around that is just gravy.

I've worked on schemes where they allow members to defer their retirement but don't provide any enhancement for doing so. That means that instead of receiving, say, £10,000 per annum from age 60, people could opt to receive £10,000 per annum from age 65 (or later, or earlier, or whatever). Inflation protection was the same after age 60 whether you were deferred or a pensioner so there was really no benefit of deferring the pension to age 65 - it just meant people missed out on 5 years of income. So we would have to take great pains to explain to members (without crossing the line into advice of course) why they might not want to defer their pension to age 65, even though they technically could.

I've looked through the BTPS site to see if I can find any info about late retirement, and it looks like they allow it and provide an enhancement for active members, but I can't see anything similar for deferreds so I can only assume the people you've spoken to are correct. It's a little odd because in Section B there are two tranches of service with different NPAs, and it looks like the scheme forces you to draw on both together (if you have both) so you'll end up taking one either before or after its NPA by default. That should mean they would allow members with both tranches to defer retirement for the tranche with the earlier NPA, and I would expect them to offer fair late retirement enhancements for that tranche as a result, otherwise it's basically forcing reduced early retirement by making the alternative rubbish value. But you don't have both tranches so that doesn't apply to you anyway. Without the scheme rules, I can't deduce any more than that.

If they offer no late retirement enhancement, then by taking it now rather than later, you'll still get more income even if some of it is taxed. Put it this way - I wouldn't turn down a pay rise just because it put me into a higher tax bracket.

Triumph13

If you have headroom with respect to the Lifetime Allowance then how about taking the pension, but putting an equivalent amount from your earnings into a private pension or SIPP to avoid being pushed up into HRT?

PensionTech

I've just thought of something else as well - you could put the extra income into a new pension and get tax relief on it in order to avoid higher rate. Then you could draw it out whenever you want after 63 at a lower rate of tax, and 25% of it would be tax-free as well. Result! Particularly if you're working - your company has to provide you with access to a pension scheme, and if they match contributions and/or allow salary sacrifice, you'll get even more free money from increasing your contributions to allow for the extra income.

EDIT: Triumph beat me to it

robin61

Just to add to what PensionTech said.

The BT Pension Scheme has a NRA of age 60 for pre April 2009 service and age 65 for post April 2009. So all of your service is going to have an NRA of age 60.

I'm an active member of scheme B and when I take my pension I have to take the whole lot together.

xylophone

And have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

kidmugsy

You are in a DB pension scheme that pays from age 60: apension scheme with a Crown guarantee. That should be a matter for celebration, not whingeing.