BT Leaver and Redundancy payments
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With the closure of the BTPS to new contributions from 30 June 2018 it's not going to be possible to pay into the AVC in the same way as in the past.
As I understand it we will be allowed to contribute to a specially defined pot in the BTRSS until September 2019. After this date it gets transferred back to the AVC and can be used in the same way to increase your lump sum in either Section B or Section C
BT have not been clear about the choice of funds we will have from 1 July or indeed which fund it gets paid into in September 2019. So I guess we will need to wait and see.
If you leave before September 2019 and you have paid AVC earmarked money after 1 July 2018 I assume that you will be able to use it in the usual way but again I've not seen this in writing.
Hopefully it will all be clarified in due course.
Unfortunately there are a lot of things haven't been explained or sorted out.0 -
tigerspill wrote: »Unfortunately there are a lot of things haven't been explained or sorted out.
I was told by HR to expect a briefing covering this on about 7 June. Let's see !0 -
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tigerspill wrote: »We wait with bated breath.
The other thing I am awaiting is the changes to the actuarial reduction %ages.
I was told that they are expecting 3% per annum for scheme B and 3.5% for scheme C. There was something from Connect that said BT had committed to leave the new rates in place until at least 30 June 2019. I hope it's longer of course. But if these new rates are right that's significantly better than the current rates which are more like 5.5 % per annum. I'm not planning to wait until I am 60 to retire and was thinking about deferring but I'm thinking now there is going to be less of a case for deferring.0 -
tigerspill wrote: »Thanks folks,
The reason I asked all this as I had heard that all tax was due as soon as you go and that delaying payment of the cash didn't delay the tax due.
Apologies for resurrecting an old thread, but this is very pertinent to me right now.
Does spreading the payment across the two or three years attract resets of allowances per tax year or not? I cannot get an answer from HR.
Also does anyone know if leaver payment sums above £30k are considered as 'income' and therefore contribute to the current years earning available for making pension payments against?
Thanks in advance,.0 -
my redundancy payment (not from BT) came a month after I left, and after I had received my P45.
To my surprise it was taxed on an emergency / month 1 basis -- so a large amount of tax to claim back0 -
There is an early leaver package that's been offered to some at the moment. Here's my understanding of how it's paid.
You can spread the payment over 3 tax years 2018-19, 2019-20 and 2020-21. You can also pay an amount into the BTRSS and that means you pay the money in gross and no Income Tax or NI is due. (Remember the BTPS closes on 30 June so it's now not possible to pay this into your AVC and BT are not allowing it to be paid into the Special aditional Contribution arrangement). Only £30K is tax free. The rest has always been taxable at your marginal rate and people usually choose to do one or both of the above to avoid paying higher rates of income tax which would probably occur if you took it all in the current tax year.
There is a new fly in the ointment though. From April 2018 there is a PILON (payment in lieu of notice). This is where both Income Tax and National Insurance are due. The amount it's due on will depend on the individual - your salary and the amount of notice your contract says BT has to give you. BT gives you a calculator to work out what the deemed PILON is.
Any amount in excess of the PILON still gets the £30K tax free.
If I've understood it rightly the PILON will all come out of your first year's payment.
So what was relatively straight forward has just gotten a lot more complicated.
Here's my understanding of how I think it will work. Although the FAQ's BT gave us were not very clear. It's a new thing so lots of confusion about it.
Example of a leaver package worth £100K (nice round number)
Deemed PILON - £20K
Year 1 - £50K taken. £20K (PILON) will attract both tax at the marginal rate and NI. £30K will be tax and NI free
Year 2 - £25K taken - will be taxable at marginal rate. No NI is paid.
Year 3 - £25K taken - will be taxable at marginal rate. No NI is paid.0 -
my redundancy payment (not from BT) came a month after I left, and after I had received my P45.
To my surprise it was taxed on an emergency / month 1 basis -- so a large amount of tax to claim back
Yep they have to do it like that because of PAYE rules. Any payments made after the P45 has been issued as follows.
Up to £2875 taxed at 20%
Excess over £2875 to £12,500 taxed at 40%
Excess over £12875 taxed at 45%
Annoying. But at least you can claim it back.0 -
There is an early leaver package that's been offered to some at the moment. Here's my understanding of how it's paid.
Robin61,
Thank you so much for your quick and detailed reply, much appreciated. You really know the in's and out's so hope you may know the answer to a question I have been trying to get resolved for the past 24 hours....
I am hoping to use the 'Increase Your Fund' option to allocate a fairly hefty chunk to the BTRSS equivalent to using up most of this years remaining £40k maximum and unused proportions from the past three years.
My worry though is whether I am at risk or falling foul of the secondary tax condition that 'Employee' contributions can only save up to your total income in each tax year. This condition as I understand it does not apply to 'Employer' contributions.
I'm hoping that either the IYF is classed as an Employer payment or the IYF allocation is recognizable as income to the taxman.
Would you by any chance know?0 -
OhToBeFree wrote: »There is an early leaver package that's been offered to some at the moment. Here's my understanding of how it's paid.
Robin61,
Thank you so much for your quick and detailed reply, much appreciated. You really know the in's and out's so hope you may know the answer to a question I have been trying to get resolved for the past 24 hours....
I am hoping to use the 'Increase Your Fund' option to allocate a fairly hefty chunk to the BTRSS equivalent to using up most of this years remaining £40k maximum and unused proportions from the past three years.
My worry though is whether I am at risk or falling foul of the secondary tax condition that 'Employee' contributions can only save up to your total income in each tax year. This condition as I understand it does not apply to 'Employer' contributions.
I'm hoping that either the IYF is classed as an Employer payment or the IYF allocation is recognizable as income to the taxman.
Would you by any chance know?
Putting a proportion of your leaver payment into increase your fund (BTRSS) is a good way of avoiding some income tax. Whatever you put in counts as an employer payment as it's done via salary sacrifice so it's fine to put it in.
However you might need to be careful about exceeding the annual allowance of £40K.
I'll assume you are are either a scheme B or scheme C member. Is that right ? If so here is what you will need to take into account.
1) Growth in the BT Pension scheme fro 6 April 2018 to 30 June 2018 (when the scheme closes). I have already spoken to Accenture for an estimate of this and they have advised me it's likely to be counted as nil growth due to the adjustment they make for inflation and the short period of time we are still in it in 2018/19. So I think you are safe to count that as zero.
2) Any AVC payments you made in 18/19
3) Anything paid into the new Special Additional Voluntary contribution from 1 July.
4) Anything paid by you and BT into the BTRSS from 1 July. This will also include anything you choose to put in via increase your fund.
5) Anything you might have put into a private pension outside of BT
Remember all of the above refers to the gross amounts.
So if the total of all that comes to more than £40K then you've exceeded your annual allowance. However you are allowed to carry forward any unused annual allowance from the previous tax years.
2017/18
2016/17
2015/16
You always use the oldest unused allowance first so in this case 15/16.
If you go to the pension portal and get your annual statements they should tell you how much unused you have from 15/16 and 16/17. Hopefully that will be enough to cover what you want to do. If not you will have to try to find out how much unused you have from 17/18. Unfortunately the new statements are not there yet (usually September). So you would need to contact the administration team to ask them for an estimate.
You don't want to put in more than this year's allowance plus any carried forward.
Remember though you will still be liable for tax and NI on the PILON.0
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