Sections B & C of the BT Pension Scheme (BTPS)

State Pension changes and

Sections B & C of the BT Pension Scheme (BTPS)

From 6 April 2016, the Government is changing the State Pension system for everyone who reaches their State Pension Age on or after 6 April 2016. You may have read about these changes in the BT Pension Scheme Trustee Newsletter.

You don’t need to take any action, but we want to keep you up to date with the Government changes to the State pension system from 6 April 2016.

In April 2009:

·  Your pension from the BT Pension Scheme (BTPS) became linked to how the State Second Pension (S2P) operated at the time.

·  The BTPS ceased to be contracted out of the State pension system and you started to build up extra S2P as well as Basic State Pension entitlements.

·  An offset was introduced to your BTPS pension, known as the State Pension Offset, which is applied when you reach your State Pension Age. This offset was designed to take into account the extra S2P you started to build up, so that your total overall State and BTPS pension would be as near as practicable the same as if the BTPS had continued to contract out.

·  You and BT started to pay higher NI contributions and your BTPS contributions were reduced to compensate you for the higher NI contributions you started to pay. You will see this presented on your payslip as an allowance.

·  BT recognised that in the future the Government may make some changes to how the State Pension system and S2P operated. We therefore agreed with the unions (CWU and Prospect) that in the event of a change to S2P where there is an impact on the way in which this arrangement operates, to review the arrangement, with a view to neutralising the overall impact on members' benefits.

From April 2016:

From 6 April 2016, the Government is changing the whole of the State pension system. The current Basic State Pension and S2P will no longer exist and will be replaced with a new Single Tier Pension which is calculated very differently.

Although the State Pension Offset will continue to be applied to your BTPS pension, it will no longer be linked to S2P as this has been replaced by the Single Tier Pension. This means that whilst your BTPS benefits will build up in the same way as they do now, your total State Pension after April 2016 added to your BTPS benefits will not necessarily be the same overall in the future.

Your BT Pension Scheme benefits
Your BTPS benefits will build up in the same way as they do now and the State Pension Offset will continue to apply. Your BTPS contributions will also continue at the same rate. There are no changes to the pension benefits you’ve already built up in the BTPS, which are protected by law and cannot be reduced or taken away.
Your State Pension benefits
The State pension changes are complex and will affect each member reaching State Pension Age (SPA) on or after 6 April 2016 differently. Depending on your circumstances, your State pension position at SPA may be better or worse under the new State pension system. Due to the changes being made by the Government, many members may find they reach the maximum State Pension over a shorter period of time, but the total amount of State pension they will receive may be lower than they would have been under the current system. For further details on the State pension changes, please see the ‘Useful sources’ section below.

What’s Happening Now?

Discussions with the unions regarding the impact of the Government’s removal of S2P and the introduction of the Single Tier Pension have now commenced and we’ll write to you again on completion of those discussions.

Useful sources

·  You can read more about the State pension changes in the Trustee newsletter and on the gov.uk site at https://www.gov.uk/new-state-pension.

·  There is lots of information about how your benefits work on the Trustee website.

·  You can see details of your existing arrangements from the BTPS portal via the HR People System, which can be accessed at on the pension pages of the intranet.

·  Frequently Asked Questions

Kevin O’Boyle

Head of Pensions

This communication sets out a summary of the position for active members of Section B & C of the BT Pension Scheme. The detail is set out in the BTPS Rules (and in the event of any discrepancy, the Rules will prevail). This communication is also not intended to be a complete description of all the changes being made by the Government to the State pension system. If you wish to find out more about the State pension changes, there are some useful sources above.