BT Pension Retirement Statement

mbee123

Hi,

I'm a deferred Section C member in the BT scheme and have recently turned 51, I left BT around 7 years ago.

I raised a query about 4 months ago regarding my 'last day of service figure' as I believe it is slightly lower than it should be but in error they have sent me a Retirement Statement, and the figures have got me thinking, even slightly tempted.

As of October 2017 my annual pension was valued at £15044 payable at 65 although the majority would be available at 60 without penalty, and I had planned to draw it then.

The retirement statement offers an annual pension of £11210 + £1735 lump sum or £9041 + lump sum £60276. This doesn't seem like much of a reduction (around 26%) to take it 9 years early. I have asked BT to send me the reduction factor calculations as the figures look too high to me.

I am currently working and to draw my pension now would push part of it into the higher tax bracket but going down to 4 days may be an option which would mean 20% tax on almost all of it. It could even allow me to explore other options as I don't particularly enjoy my current job.

I plan to retire in around 5-6 years, I would appreciate some fairly swift advise as I need to respond within a couple of days.

Should I consider taking the pension now without taking much of a hit on it or should I leave as is?

Thanks for any advise...

mbee123

Just received the below, this helps me understand the fairly high figure after deductions for taking pension early, reduction factor is a lot lower than my other scheme (TATA) which is around 4% per year.

GMP
Retirement age 50 51 52 53 54 55 56 57 58 59 60
% reduction 12.1 11.3 10.4 9.4 8.4 7.2 6.0 4.7 3.2 1.7 0.0


Post April 09 service:

Retirement age 50 51 52 53 54 55 56 57 58 59 60
% reduction 41.9 40.1 38.2 36.2 34.1 31.8 29.4 26.9 24.3 21.4 18.4

jennyjj

mbee123 wrote: »

Hi,

I'm a deferred Section C member in the BT scheme and have recently turned 51, I left BT around 7 years ago....

As of October 2017 my annual pension was valued at £15044 payable at 65 although the majority would be available at 60 without penalty, and I had planned to draw it then.

The retirement statement offers an annual pension of £11210 + £1735 lump sum or £9041 + lump sum £60276. This doesn't seem like much of a reduction (around 26%) to take it 9 years early. I have asked BT to send me the reduction factor calculations as the figures look too high to me.
...
Should I consider taking the pension now without taking much of a it on it or should I leave as is?

Thanks for any advise...

Hi, The Actuarial Reduction factors were seriously slashed last month, to the order of 3% for each year. It persuaded me to take mine early. At just 51, you might be stretching it a bit early, but the AR rates are certainly not prohibitive.

robin61

jennyjj wrote: »

Hi, The Actuarial Reduction factors were seriously slashed last month, to the order of 3% for each year. It persuaded me to take mine early. At just 51, you might be stretching it a bit early, but the AR rates are certainly not prohibitive.

Yes it's made a big difference. I have just retired early from BT (today actually). I had always thought that I would defer to age 60 but I decided to take it now (I am 58 in January). I'm scheme B and it was around 3% per annum. I've had plenty of time to contemplate and I'm pretty pleased with the decision. I'm looking forward to the lump sum enhanced by my AVC now.
I did see something from the Union a while back which said that BT had committed to the new rates until June 2019. So I assume that after this date they could change again. If they do I would be willing to bet they won't be in our favour.

robin61

mbee123 wrote: »

Hi,


I am currently working and to draw my pension now would push part of it into the higher tax bracket but going down to 4 days may be an option which would mean 20% tax on almost all of it. It could even allow me to explore other options as I don't particularly enjoy my current job.

I plan to retire in around 5-6 years, I would appreciate some fairly swift advise as I need to respond within a couple of days.

Should I consider taking the pension now without taking much of a it on it or should I leave as is?

Thanks for any advise...

At 51 even with the now more favourable reduction rates it's still a sizeable chunk off your pension especially if you are going to pay 40% tax.
As mentioned in the post to Jenny there is no guarantee that the reduction rates will stay at the current level.
Difficult decision for you I think. I'd say if it's going to help you change your lifestyle for the better it's worth considering but not if you end up with the same or a similar job and therefore paying a lot of tax on income you presumably don't really need at present.

kidmugsy

robin61 wrote: »

the same or a similar job and therefore paying a lot of tax on income you presumably don't really need at present.

Why would he pay more tax? Surely he'd just make pension contributions to avoid 40% tax?

robin61

kidmugsy wrote: »

Why would he pay more tax? Surely he'd just make pension contributions to avoid 40% tax?

I agree he could do that but he didn't suggest it was part of his plan.

mbee123

Thanks everyone for taking time out to respond

I did see something from the Union a while back which said that BT had committed to the new rates until June 2019. So I assume that after this date they could change again. If they do I would be willing to bet they won't be in our favour.

Interesting, this puts a timer on my decision, I was leaning towards taking it on my next birthday (52) in June, to minimise the reduction slightly, but this could be a risky tactic if they change again.

Originally Posted by kidmugsy View Post
Why would he pay more tax? Surely he'd just make pension contributions to avoid 40% tax?
I agree he could do that but he didn't suggest it was part of his plan.

Plan is pretty fluid at the moment but this is something I would be looking at doing if I decide to go ahead

eaec001

Well this saved me making my post!
I am a deferred member of section C who left 10 years ago so all my service was pre-2009.
I am 51 and a couple of weeks ago asked for a pension quote out of curiosity. Obviously it is easy to calculate my pension at age 60 so had an expectation of about half that as a pension if I were to take it now.
The quote came through and I was very surprised to see that Option 1 - Standard Scheme benefits gave a figure that was only 5% below my age 60 calculation. I became aware that the reduction figures had changed but as yet have not received a response to my request for more details. So thanks for posting them, although I am still slightly confused that the reduction appears to be less than the figures quoted earlier in this thread.
I can't help feeling I must be missing something as at the moment I'm not sure why I would wait until I'm 60? I must admit that what started as a random enquiry has really got me thinking about my life plans.

robin61

eaec001 wrote: »

Well this saved me making my post!
I am a deferred member of section C who left 10 years ago so all my service was pre-2009.
I am 51 and a couple of weeks ago asked for a pension quote out of curiosity. Obviously it is easy to calculate my pension at age 60 so had an expectation of about half that as a pension if I were to take it now.
The quote came through and I was very surprised to see that Option 1 - Standard Scheme benefits gave a figure that was only 5% below my age 60 calculation. I became aware that the reduction figures had changed but as yet have not received a response to my request for more details. So thanks for posting them, although I am still slightly confused that the reduction appears to be less than the figures quoted earlier in this thread.
I can't help feeling I must be missing something as at the moment I'm not sure why I would wait until I'm 60? I must admit that what started as a random enquiry has really got me thinking about my life plans.

You can ask the administrators to e mail you the scheme C actuarial reduction tables.
You are right to be considering your options. The lower the reduction the stronger than case for taking the pension early. Of course you still get more if you wait but it now takes longer to make up for the extra years of pension payments you could have been taking. I was almost certainly going to defer to age 60 but the lower reduction figures at only 3% per annum for scheme B twisted my arm.

tigerspill

robin61 wrote: »

You can ask the administrators to e mail you the scheme C actuarial reduction tables.
You are right to be considering your options. The lower the reduction the stronger than case for taking the pension early. Of course you still get more if you wait but it now takes longer to make up for the extra years of pension payments you could have been taking. I was almost certainly going to defer to age 60 but the lower reduction figures at only 3% per annum for scheme B twisted my arm.

New Sec. C reduction rates below. Got these in June.

Section C Members

Early payment of actuarially reduced pension after age 50

Pre April 09 service:

Retirement age 50 51 52 53 54 55 56 57 58 59 60
% reduction 30.9 28.6 26.1 23.5 20.7 17.8 14.7 11.4 7.8 4.0 0.0


Post April 09 service:

Retirement age 50 51 52 53 54 55 56 57 58 59 60
% reduction 41.9 40.1 38.2 36.2 34.1 31.8 29.4 26.9 24.3 21.4 18.4

Retirement age 61 62 63 64 65
%reduction 15.2 11.8 8.1 4.2 0.0