BT to Auto-enrol thousands into BTRSS or NEST
BT will be in the next tranche of employers to auto-enrol those of its employees who are not active members of any pension scheme. This will happen on 1 November. You may have seen the advertisements on the TV about auto-enrolment. In summary, everyone in the UK who is not an active, participating member of an occupational pension scheme – and is over 22, under their state retirement age and earns above a certain amount (currently around £8,000 pa) – will be ‘auto-enrolled’ or in other words will automatically become a member of, a ‘qualifying’ scheme.
In the immediate run-up to 1 November, the company will be writing to all those affected, which will include those who have not joined or have left the BT Retirement Savings Scheme (BTRSS), those who have taken their BT pension and who continue to work for the company, and those who for whatever reason have either left or never joined the BT Pension Scheme. Letters will also be going to everyone who is currently an active member of the BTPS or the BTRSS to explain that they will not be auto-enrolled, as they’re already in a ‘qualifying’ scheme – in other words, a scheme that meets the standards laid down by UK legislation for auto-enrolment. Those who are eligible to join the BTRSS will be auto-enrolled into that scheme. Those who have taken their BTPS pension and continue to work for BT will be auto-enrolled into NEST – the National Employees’ Savings Trust, which is the government’s own defined contribution scheme.
We will be writing to all members at the same time as BT writes to its employees, simply to explain that the auto-enrolment process has been fully discussed with the union and is a process we broadly support .But since the company is now warming up its communications on this issue – it has published information on the BT Today web site – we are also issuing this brief message.
Background information on pensions in BT
Pensions can be a daunting and complex issue and the jargon can be very off-putting. These pages are intended to take some of the 'sting' out of understanding pensions by explaining the different schemes in BT and some of the changes that have been made to them.
The full text of the agreement setting out the changes to the BTPS can be found elsewhere on this site, as can a Connect document explaining the changes and a set of FAQs.
BT Pension Scheme
The BT Pension Scheme (BTPS) is the defined benefit (DB) scheme for employees who joined BT prior to 1 April 2001. Like many high quality schemes in the UK it is closed to new members.
It has three sections: Sections A, B and C.
Section A exists following a commitment given by the Labour Government in 1968 when the Post Office, then a civil service department, was turned into a nationalised industry. (At that time, telecoms in the UK were part of the Post Office - the separation of Posts and Telecoms took place in 1981.) The commitment - which is contained in the 1968 Post Office Act and which could therefore only be changed by Act of Parliament - establishes that those who were employed in the Civil Service and who were in fact employed in the Post Office on or before 1 December 1971 would always enjoy pension benefits equal to those 'which from time to time apply' in the Civil Service.
People with a Section A right may, on retiring from or leaving BT, at that point opt for either Section A or Section B pension terms. In practice, it is currently not beneficial for any Section A member to opt for Section A; Section B is currently better.
This is the section set up to apply from 1 December 1971. It is an n/80th accrual scheme, providing a pension of 1/80th of final salary for each year of reckonable service, plus a tax-free lump sum of 3/80ths of final salary for each year of service, in respect of all service up to 1 April 2009. Since April 2009, Section B members have been continuing to build entitlement to a pension, but on different terms, with accrual now taking place on a career average basis.
The pension is index linked against the impact of inflation in full - i.e. pensioners receive full protection of the value of their pension against increases in the cost of living as set out in government orders.
The scheme also provides excellent medical retirement benefits, and partner and children's benefits.
Section B was closed to new members on 31 March 1986
This section was set up following the privatisation of BT in 1984. It opened on 1 April 1986. Section C provides a pension for all service up to 1 April 2009 on the basis of an n/60th accrual rate - but no tax-free lump sum, although members can 'commute' some pension for a lump sum if they wish (that is, take a reduction in annual pension for tax-free cash at the point of retirement). Since 1 April 2009, Section C members have been building pension benefits on a career average basis, with an accrual rate of n/80 plus a 3/80 lump sum.
The pension in payment includes limited protection against inflation - pensions increase each year by inflation as set out in government orders up to a maximum of 5%.
This section also offers good partner and children's pensions, as well as pensions for those forced on medical grounds to retire early.
Section C was closed to new members on 31 March 2001.