BT Pension Review
BT Hybrid Pension Implementation
3 December 2018
Following consultation with the CWU, BT has launched a major communication exercise detailing the implementation arrangements for the BT Hybrid pension scheme (BTHS).
Establishing the BT Hybrid Scheme, which will be a completely new pension in BT, was a major part of the 2018 Pension Agreement and it will come into operation from 1st April 2019.
This briefing provides an update on the implementation arrangements.
BT Hybrid Scheme
The BTHS will be open to around 19,000 team members in BT, Openreach and BT Fleet who were active members of the BT Pension Scheme (BTPS) when it closed to future service earlier in the year and still work for one of the three participating companies on 1st April 2019.
The BTHS pension combines both defined benefit pension – like the BTPS – and defined contribution benefits like the BT Retirement Savings Scheme (BTRSS).
By combining both types of pension the BTHS is designed to reduce investment risk and also provide more certainty of benefits for members compared with other options. Defined benefit pension benefits are guaranteed and defined contribution pension outcomes depend on a number of factors including investment returns.
Members of the BTHS will get guaranteed defined pension benefits on the first £17,500 of salary and defined contribution benefits on pensionable salaries above £17,500. The £17,500 Threshold is pro-rated for part timers and will generally increase in future by inflation.
Members will normally contribute 6.25% of pensionable salary into the BTHS. BT will pay the balance of costs for providing the defined benefits pension element and a contribution of 12% into the defined contribution section. The defined contribution comprises a 10% standard contribution plus the 2% transitional age related payments.
Joining the BT Hybrid Scheme
The BT Hybrid Scheme will launch from 1st April next year and those in scope will be able to pre-register to join from March 2019. After the launch those eligible to join will have until the end of September 2019 to make their decision.
Members will need to decide individually whether or not to join the BTHS based on their own personal circumstances. If members do not join the BTHS then their existing pension arrangements will not change as a result of the BTHS launch.
This is an important decision and members are encouraged to read the BT documentation and consider relevant factors including the following.
- The benefits already built up under the BTPS and any other existing pension benefits.
- Your attitude towards investment risk.
- Would you prefer additional defined benefits and increased certainty about benefits in retirement or more flexibility?
- Would you like your pension to be protected against inflation?
- What are your future salary/promotion expectations?
- When do you intend to take your pensions?
- How long are you likely to continue saving in either the BTRSS or BT Hybrid Scheme?
- How long might you expect to live and do you have dependents you want to provide for after death?
Individuals have an important decision to take about their future pension provision and BT is putting in place extensive support arrangements to assist members in the coming months.
- A booklet called “Time to choose: A comparison guide to your pension options” which compares the BTHS and the BTRSS, will be sent to home addresses from 29th November.
- An online modeller that compares the BTHS and BTRSS under different scenarios will be available. Members will be sent individual benefit data for use with the modeller. This will be sent out together with the booklet.
- The draft BTHS Scheme booklet which will be available on line.
- A series of seminars, webinars and conference calls.
- A Question and Answer document.
The CWU believes that having access to a modeller, as mentioned above, is essential and very helpful, to assist members to make an informed decision. However, it is important to stress that this type of modeller does not provide a guaranteed statement of pension benefits. It is a tool which generates the output data based on assumptions provided by the Company to allow for comparison between the BTHS and the BTRSS under certain scenarios. The modeller is not a substitute for independent financial advice.
Please remember that the CWU is legally prohibited from giving financial advice. If members are unsure which pension option to take then they are strongly advised to take independent financial advice.
All CWU members are entitled to a no obligation initial financial consultation with Lighthouse Financial Advice. Further information on this option is available on the CWU web site at: http://www.cwu.org/my-union/member-benefits/