Choosing between the BTRSS and the new BT Hybrid Scheme

Transcription

1 Page 1 of 17 Choosing between the BTRSS and the new Your questions and answers Making a choice Making a choice Making a choice What happens if I do nothing? I m on maternity/ paternity/sick leave/leave of absence and I can t attend an education session/one to one in person. Where can I get support? Will BT offer me access to individual financial advice? If you do nothing, you ll remain in the BT Retirement Saving (BTRSS). We won t take you out of the BTRSS unless you tell us that s what you would like to happen. We would encourage you to review and understand the information that has been put together for the. You have until the end of September 2019 to make your decision, so there s no rush. You ll be able to book a place at a webinar and arrange a time for your one to one telephone guidance call on the education registration and replay page [add link for registration and replay page]. Alternatively, you are able to contact the events team on who will help you book your places. BT will not be offering individual financial advice, but you can book a one to one guidance call with an external specialist. These sessions are to talk you through the based on your personal circumstances, in order to help you make an informed decision. These are available by going to snip.bt.com/hybrid. If, after attending a one to one session, you still feel you need individual financial advice, a good place to find a financial adviser is:

2 Page 2 of 17 Making a choice If I plan to retire soon, should I still think about joining the? As the earliest date that team members can join the is 1 April 2019, if you are leaving BT before 31 March 2019, you will not be able to join. If you are leaving after 1 April 2019, deciding whether the is right for you will depend on your individual circumstances. We would encourage you to review and understand the information that has been put together for the. You have until the end of September 2019 to make your decision, so there s no rush. Joining the BT Hybrid Why do I have to wait until March to join the new? Deciding whether to remain in the BT Retirement Saving (BTRSS) or join the new is an important financial decision. You ll need to think carefully about which scheme is right for you. We want you to have time to fully consider your options and make the most of the support we re providing before you confirm your choice. Joining the BT Hybrid What happens if I join the BT Hybrid and later get promoted to a manager role? If you get promoted to manager, you ll stop contributing to the at the end of that month and become a deferred member. You ll be automatically enrolled in the BT Retirement Saving (BTRSS) on the 1st of the following month. Once you ve left the and paid your last contribution, the trustee will confirm your and any options that you have. Joining the BT Hybrid If I join the and then change my mind, can I optout of the and Yes. You can choose to stop contributing to the at any time and ask to re-join the BTRSS. You would re-join the BTRSS on the 1 st day of the month after you had made your election and leave the

3 Page 3 of 17 re-join the BT Retirement Saving (BTRSS)? on the last day of the month during which you made your election. Joining the BT Hybrid Joining the BT Hybrid If I join and l later decide to opt out of the, can I rejoin at a later date? If I join the and I move around the BT group, can I continue to be an active member? If I join the, can I take my defined benefit (DB) and defined contribution (DC) at different times? No, if you decide to opt-out of the, you will not have the opportunity to re-join. Yes, if your employer participates in the. The employers that currently participate are BT plc, BT Fleet Ltd and Openreach Limited. Yes. You don t have to take all your at the same time. The normal pension age under the is 65. You can take your DC and DB amounts at different times (so long as you first draw either your DC or DB before age 65). Some points to remember: If you take the DB amounts before age 65, they ll be reduced for early payment. If you re still working for BT, you ll need to obtain BT s consent for payment of your DB. You can use your DC in a similar way to the BT Retirement Saving (BTRSS) scheme. Although to take full advantage of the flexibilities you ll need to transfer your out of the BT Hybrid into your own policy. If you start to draw any part of your BTHS, you ll need to leave the scheme first. The earliest age at which you can take your under current legislation is age 55.

4 Page 4 of 17 Can I take my while I am still working for BT? If I join the, can I transfer my built-up BT Retirement Saving (BTRSS) savings to the? If I join the, can I transfer I have in any other scheme to the? If I work part time how would any be affected? All will be paid at age 65 unless you are still employed by BT, in which case they would become payable on your date of leaving employment. If you re still working for BT, you ll need to obtain BT s consent for payment of your DB. Yes. Your BTRSS savings can be transferred to your defined contribution (DC) pot. Ordinarily, the will not accept transfers of other pension. We have however agreed with the trustee that your BT Retirement Saving (BTRSS) savings can be transferred to your defined contribution pot. If you work part-time, your are calculated proportionally based on your actual hours. Let s look at an example team member who works 60% of full-time: Works 21.6 hours a week (full-time hours would be 36 hours a week) Has a salary of 18,000 a year (their full time equivalent salary is 30,000 a year) The they build up are 60% of the amounts they d build up if they

5 Page 5 of 17 worked full-time. In the first year this is: 100 per year pension payable from age cash lump sum payable at age to their defined contribution pot (which includes 150 of transition payment) Have the being offered in the been reviewed by the trade union, the CWU? Why is there a threshold for calculating the? If you change your hours, the calculation gets automatically updated to reflect your new hours. Yes. We ve worked closely with the CWU throughout the set-up of the BT Hybrid. The Threshold is used to determine the amount of your defined benefit pension and defined benefit tax free cash lump sum. The amount being paid by BT into your defined contribution pot will be calculated using your pensionable salary above the Threshold. operation How will the be managed? The will be administered on a day to day basis by Deloitte, who are specialists at operating schemes like this. This is overseen by the Trustee of the, which is an external professional Trustee company who specialise in running pension plans. In addition, there is a Committee which includes BT and CWU (trade union) members. This Committee provides additional

6 Page 6 of 17 operation Will any of the BT Pension (BTPS) Trustee Directors be involved in running the new BT Hybrid? governance and helps present the interests of members to the Trustee. The will have a separate Trustee to the BTPS. We ve chosen an external professional Trustee company who specialise in running pension plans to run the. The BTPS Trustee will continue to manage your built-up in the BTPS. operation Will BT change the in the future? The is a new scheme put in place following the agreement made with the trade union, the CWU to close the BT Pension (BTPS) in June We don t anticipate making any changes to the benefit structure of the scheme in the near future. We can t predict what will happen to BT or in the wider economy over the longer term and so we can t rule out the possibility that we might propose making changes to the BT Hybrid at some point in the future. We would need to discuss with the CWU and, as appropriate, carry out a consultation in a similar way to that which was carried out before we made changes to the BT Retirement Saving (BTRSS) and BTPS. operation Will the be covered by the Crown guarantee? There is no Crown Guarantee in relation to the. However, in the event of BT s insolvency, the defined benefit part of the would be partially covered by the Pension Protection Fund and the defined benefit part partially by the Financial Services Compensation. operation If I join the, will I still get a benefit statement every year? Yes, you ll get a statement each year that tells you: The amount of pension and cash lump sum that you have built up Your savings in your defined contribution pot

7 Page 7 of 17 How your defined contribution pot investments have performed What are the charges in the BT Hybrid? An annual management charge would apply to your defined contribution (DC) pot, in the same way as it does in the BT Retirement Saving (BTRSS). BT has negotiated a significant discount on the annual management charges with Standard Life, and whilst it will depend on which funds you choose, the charges for the default fund are very similar to within the BTRSS. Details of the charges for the BTRSS are available at Details of the charges for the proposed funds in the can be found in the full booklet (LINK TO BE ADDED) Other What about my Special Additional Contributions? If you are currently making these you can continue until September 2019, subject to the same conditions as currently. There is no change to the arrangements made with the BT Pension (BTPS) if you choose to join the. Modeller / member examples Does the new modeller also take into account the additional 2% per year transition payments? Yes, the modeller includes the transition payments in both the BT Retirement Saving (BTRSS) calculation and in the calculation of the defined contribution pot. When calculating the period over which the additional transition payments are made the modeller uses your age at 1

8 Page 8 of 17 April Modeller / member examples How are tax-free cash lump sums calculated in the modeller? When you first go to the analysis page of the modeller, it will default to show the maximum tax-free cash lump sums. For the BT Pension (BTPS) and this is an estimate of the maximum tax-free cash lump sum you could receive (broadly 25% of your benefit value at retirement) at the retirement age you have selected based on standard BTPS and. This means that the pension figures shown are lower to reflect the pension given up in exchange for the additional tax-free lump sum. In practice, you may also choose to take less cash than the maximum, which will consequently increase the amount of pension you receive in the BTPS and/or. If you choose to model the impact of using your BTPS Additional Voluntary Contributions (AVCs) and Special Additional Contributions (SACs) to pay your BTPS tax free cash, the maximum tax-free cash lump sum will first be taken from your AVC/ SAC funds. The modeller shows the pension available at the retirement age you have chosen together with the tax free cash lump sum options. It allows you to choose between the standard and maximum options. For Section B members, the Standard lump sum is calculated as: 3 times BTPS pension built up to 30 June 2018 and

9 Page 9 of 17 3 times DB pension built up from 1 April 2019 in the BT Hybrid. For Section C members, the Standard lump sum is calculated as: 3 times BTPS pension built up between 1 April 2009 and 30 June 2018 and 3 times DB pension built up from 1 April 2019 in the BT Hybrid. Modeller / member examples How does the assumed defined contribution (DC) fund performance impact the modeller results? You can choose between Low, Medium and High assumed defined contribution (DC) investment performance in the modeller. These choices will affect the calculation of your defined contribution funds in the BT Retirement Saving (BTRSS), defined contribution pot in the as well as any Additional Voluntary Contributions and Special Additional Contributions you ve input. Low performance assumes an investment return of 2.5% each year, Medium performance assumes a return of 5% each year and High performance assumes a return of 7.5% each year. These returns represent the level of investment risk and assumed investment return that you are taking on. For example, the High performance option refers to higher investment risk which may lead to higher assumed investment returns.

10 Page 10 of 17 The investment returns actually achieved may be significantly different to the assumed returns. If you choose to drawdown your DC (and therefore leave some funds invested after your selected retirement dates, your funds are assumed to return 2.5% each year in the period after retirement). Modeller / member examples Modeller / member examples Does the modeller make the same assumptions across all schemes? Will I be able to use the modeller at home? The choices that you make in the modeller for salary growth, assumed defined contribution (DC) fund performance, target BT Pension (BTPS) retirement age and tax-free lump sum at retirement are used in the calculation of both the BT Retirement Saving (BTRSS) and. Contributions paid are assumed to be the same in both schemes, except where you select a 5% contribution rate. In this case, the assumed contribution to the will be 6.25% as this is the minimum contribution allowed. Yes, you ll be able to use it at home as long as you re connected to the BT intranet. You can find the modeller on snip.bt.com/hybrid through the navigation menu. You ll need your data statement with you each time you use it. You ll get the best experience by using a PC or a laptop. The modeller will work on mobile devices, but because of the amount of information, we wouldn t suggest that you view it on your phone. Modeller / Which factors are used in the The disclaimer page of the modeller sets out the assumptions that have been

11 Page 11 of 17 member examples modeller? made in the calculations. You should read this carefully before you use the information that it provides. You are able to review the disclaimer at any time by clicking the button on the analysis page. You can also see the assumptions made on the PDF output by clicking the Print/save as PDF button at the top of the analysis page. Modeller / member examples Why is the State Pension not shown in this modeller? The modeller is intended to help you to compare the you d receive if you choose to remain in the BT Retirement Saving (BTRSS) or if you choose to opt-out of the BTRSS and join the. Whichever decision you make, you ll receive the State Pension that you ve earned, so we ve removed it to help simplify the amount of information shown on the analysis page. To find out more about your State Pension you can visit Investment Choices Are the default investment funds the same in both the and the BT Retirement Saving (BTRSS)? The BTRSS low involvement option and the Default Lifestyle Option both use pre selected investment funds for your defined contribution savings and automatically change the mix of funds used as you get closer to your Selected Retirement Age. The pre-selected funds used in these two options are different. Pages 25 and 26 of the Comparison Guide set out the different funds used. This is because the aims for the two default options are different:the BTRSS low involvement option is designed to provide you with flexibility when you

12 Page 12 of 17 come to decide the you want to take at retirement. The Default Lifestyle Option is designed for you to take all your defined contribution pot as a cash lump sum, at or close to your Selected Retirement Age. You can of course select a different fund from the default. Investment Choices Can I use the same investment fund in the as I am currently using in the BT Retirement Saving (BTRSS)? The has a smaller range of self-select funds available than the BTRSS, although some of the funds available are the same or similar. The range of funds available in the is intended to cover the range of different investments including different risk levels. The structure of the BTRSS is different and allows you more flexibility over your investment choices. Investment Choices Why are the default investment funds different between the schemes? The pre-selected funds used in these two options are different. Pages 25 and 26 of the Comparison Guide set out the different funds used. This is because the aims for the two default options are different: The BT Retirement Saving (BTRSS) low involvement option is designed to provide you with flexibility when you come to decide the you want to take at retirement. The Default Lifestyle option is designed for you to take

13 Page 13 of 17 all your defined contribution pot as a cash lump sum, at or close to your Selected Retirement Age. You can of course select a different fund from the default. Investment Choices Can you confirm the charges for the default fund? The Default Lifestyle Option charges depend on the mix of investment funds being used for your defined contribution pot at any particular time. Broadly the Annual Fund Charges (AFC) change over time as follows: Years toselected retirement age Annual fund changes % % % % Investments Can you explain how my funds would change as I approach retirement? In the Default Lifestyle Option, the mix of funds used changes in three different phases called the growth phase, the de-risking phase and the nearing retirement phase. The aim of the growth phase is to achieve good long-term growth for your defined contribution pot that at least keeps up with inflation. This will help

14 Page 14 of 17 maintain and potentially increase, the future buying power of your defined contribution pot. The de-risking phase begins 15 years before your Selected Retirement Age. It aims to provide increasing certainty of the cash benefit that your defined contribution pot may provide. The nearing retirement phase begins 10 years before your Selected Retirement Age. The aim of the nearing retirement phase is to protect the value of your defined contribution pot by automatically moving it to short-term bonds over time. When you are 5 years from your Selected Retirement Age your defined contribution pot will also start moving into cash.

15 Page 15 of 17 How can I use my defined contribution pot flexibly? Like the BT Retirement Saving (BTRSS) you can choose from a range of options for taking your defined contribution pot including: Taking it all as a cash lump sum

16 Page 16 of 17 Taking a flexible income Buying a pension (known as an annuity) More information on these options is shown on pages [12 and 13] of the BT Hybrid member booklet available here: [insert link] If you want to draw income flexibility, then you ll need to transfer your defined contribution pot out of the to a different pension plan that offers flexible retirement products (for example Income Drawdown). This would allow you to use your savings in a more flexible way. If I want to use my defined contribution pot flexibly, why do I have to transfer the funds out of the scheme? The does not offer any products that would allow you to keep your defined contribution pot invested whilst drawing a flexible income over time. BT and the Trustee believe these external pension arrangements provide more choice and greater opportunity to match individuals plans for the future than could be offered from the. If I take my defined after age 65 is there a late retirement factor applied? If you are still an active member of the and take your after age 65, no late retirement factor is applied, this is because you

17 Page 17 of 17 will be continuing to build up additional in the. If you re still employed by BT, but are no longer an active member of the BT Hybrid, a late retirement factor will apply to the pension and cash lump sum elements if you continue working for BT after age 65. If you no longer work for BT the latest you can take your is age 65 and no late retirement factor will be applied. general How will I know when to let BT know my decision about whether or not to join the? If you want to join the, you need to let BT know your decision before 30 September 2019 (although to join at the earliest opportunity, from 1 April, you d need to let us know in March). Don t worry, we ll be sending out reminders between March and September 2019.