The Additional State Pension – also known as the State Earnings-Related Pension Scheme (SERPS) and the State Second Pension – is money that the Government pays you on top of your Basic State Pension if you reached retirement age before 6 April 2016. It’s automatically paid with your Basic State Pension if you’re entitled to it. You won’t get the Additional State Pension if you reached State Pension age on or after 6 April 2016. You’ll get the New State Pension instead.
An Additional Voluntary Contribution (AVC) fund is a way to build up extra money for your retirement. It’s a type of defined contribution pension. If you saved money into a BTPS AVC fund, this money is invested to give it a chance to grow. You can currently use your AVC fund to increase your tax-free lump sum or buy a lifetime annuity or you can transfer it into another pension scheme. Because your AVCs are invested, their value can go down as well as up.
This is an adult who you’ve nominated to benefit from your pension when you die. They must, in the Trustee’s opinion, be wholly or partly financially dependent on you. You can only nominate an adult dependant if you’re not married or in a civil partnership. This term also describes an adult who wasn’t nominated by you, but who was, in the Trustee’s opinion, wholly or partly financially dependent on you at the time you died.
The Annual Allowance is the maximum amount of money you can put into a defined contribution (DC) scheme, or the total amount of benefits you can build up in a defined benefit (DB) scheme in a tax year, before you may have to pay tax. From 6 April 2023, the Annual Allowance is £60,000 for most people. The amount could be less if you’ve already taken money out of any of your pension schemes or if you’re a high earner. All the money that goes into all your pension schemes counts towards your Annual Allowance: it’s not a ‘per scheme’ maximum. If you go over your available Annual Allowance in a year, you won’t get tax relief on anything over the maximum, and you’ll have to pay HMRC an annual allowance tax charge. You can find out more at gov.uk/tax-on-your-private-pension/annual-allowance.
A regular, guaranteed income for life. The level of income that different annuities offer depends on the provider, the type of annuity and the features you choose. For instance, you could choose a single or joint-life annuity, or one that pays a fixed income or an income that increases each year. Once you’ve chosen an annuity, you normally can’t change your mind. If you have BTPS AVCs, you can use them to buy a lifetime annuity on the open market.
If you reached State Pension Age before 6 April 2016 you get the Basic State Pension. To get the full amount, you must have 30 qualifying years of National Insurance contributions or credits. The New State Pension replaced the Basic State Pension for people who reach State Pension age on or after 6 April 2016.
British Telecommunications plc. ‘BT’ also includes any subsidiary or associated company that employs members of the BTPS. British Telecommunications plc. ‘BT’ also includes any subsidiary or associated company that employs members of BTPS. BTPS is a separate legal entity that operates independently of BT Group.
The BT Pension Scheme.
On 1 April 2009, Section B and C of BTPS changed from a Final Salary pension scheme to a CARE scheme. In a CARE scheme, you build up a block of benefits each year, based on your Pensionable Salary (or Shadow Salary) for that year. Each block increases each year in line with the change in the Retail Prices Index (RPI) or with your Pensionable Salary, whichever is lower. Then we add all the blocks together to give your total CARE pension and CARE lump sum. Each block of pension is equal to 1/80th or 1/90th of your Pensionable Salary. Your lump sum is 3/80ths or 3/90ths of your Pensionable Salary for each year you're in BTPS.
A cash amount that broadly reflects the total value of all your BTPS benefits if you were to transfer them to another pension scheme. To work it out we look at how much it is likely to cost to provide your benefits under the Scheme, including:
A partner of the same or opposite sex who, under the Civil Partnerships Act 2004, has entered into a legal partnership with you.
The CPI measures the average change in prices over time that consumers pay for a range of goods and services. These goods and services can include everything from cinema tickets to food, but exclude housing costs and mortgage payments. The Government uses the CPI to measure inflation.
CPIH is a measure of Consumer Price Inflation with Housing, which relates to owner occupiers’ housing costs (OOH). CPIH measures the average change in prices over time that consumers pay for a range of goods and services, with the addition of housing costs and mortgage payments. The government uses CPIH as its lead measure of inflation.
Before April 2009 BTPS was contracted out of the State Second Pension. From April 2009 until April 2016 it was contracted in. When BTPS was contracted in, members paid more in National Insurance contributions and built up a State Second Pension. When it was contracted out, they didn’t. In return for paying less in National Insurance, members gave up their entitlement to a State Second Pension. Instead, BT promised to pay them a certain amount of pension in place of the extra State Pension they were giving up. In April 2016, the Government abolished contracting in or out along with the two-tier pension system.
This is a pension scheme that, like the BTPS, pays you an income for life based on a formula that uses your Final Pensionable Salary (or CARE) and Pensionable Service (also known as Reckonable Service). Unlike with defined contribution pension schemes, your main pension is not directly affected by the ups and downs of the financial markets.
A pension scheme that’s based on the amount of money you save – or contribute – into it. Your money is then invested to give it a chance to grow, but your fund is affected by the ups and downs of the financial markets. Although the main BTPS is a defined benefit scheme, any AVC fund within it is a defined contribution scheme.
These are dependent children who you conceived, adopted or became a step-parent to before you stopped working for BT and who are:
A cap on the amount of earnings that we can use to calculate your pension under BTPS.
For Section B members, this is the salary we use to calculate what you get from the Final Salary part of your pension. That’s the pension you built up before 1 April 2009. We use either:
For Section C members, this is your highest level of Pensionable Salary (or Shadow Salary) over any continuous 12 month period in your last three years of Pensionable Service. It can’t be higher than the maximum Pensionable Salary allowed under the Earnings Cap.
This is where you take your BTPS pension and carry on working for BT at the same time, as long as you meet certain conditions. You need to fill in a Flexible Retirement Application Form on BT’s intranet and BT must agree to your application.
As a result of a legal change, Guaranteed Minimum Pension (GMP) built up between 1990 and 1997 must be equalised for men and women. The rules for how GMP built up were based on the way the State Pension worked at that time, with different State Pension ages for men and women. As a result, men and women could build up different amounts of GMP, even if they worked for the same period of time on the same pay. Sometimes this could mean that the opposite sex is better off. To ‘equalise’ GMP we work out how much GMP you would have built up if you were the opposite sex. If this would have resulted in a higher overall pension, you could be due a slightly higher pension now. If it would have resulted in a lower overall pension, there will be no change to your pension. Find out more in this video and factsheet.
The Guaranteed Minimum Pension (GMP) applies to you if you were a member of the Scheme between April 1978 and April 1997. It protected the pension rights of members in defined benefit pension schemes that, like BTPS, were contracted out of the State Earnings-Related Pension Scheme (SERPS). The GMP is the minimum level of pension you’re entitled to from the BTPS. It’s based on the amount you would have had if you’d been contracted in to SERPS. You will normally get your GMP at 60, if you’re a woman, and 65 if you’re a man, regardless of your State Pension Age.
HM Revenue & Customs – the people who collect our taxes to pay for the UK’s public services.
The everyday prices you pay for goods and services increase over time. The rate of this increase is known as inflation. To measure the rate of inflation we apply to pension increases, we use both the Consumer Prices Index and the Retail Prices Index. The index we use depends on which Section of BTPS you’re in.
This was the limit on the total value of pension savings you could build up through your lifetime without triggering an extra tax charge (known as the lifetime allowance charge). For the 2023/2024 tax year the standard Lifetime Allowance was £1,073,100.
The government removed the Lifetime Allowance with effect from 6 April 2024. There is now a Lump Sum Allowance, Lump Sum and Death Benefit Allowance and an Overseas Transfer Allowance.
You can find out more on the new tax-free allowances in this glossary and at moneyhelper.org.uk
Because the Lifetime Allowance (LTA) changed over the years, people who had benefits that were over the Lifetime Allowance were able to protect the value of their benefits from future tax charges. This remains relevant even though the Lifetime Allowance itself was abolished from 6 April 2024.
There are different types of protection, each with different conditions attached. Check the latest government information about the different protections at gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance. Individuals have until 5 April 2025 to apply for Fixed Protection 2016 and Individual Protection 2016.
If you’ve previously protected your Lifetime Allowance through HMRC and not told us, please give us a call on 0800 731 1919 and tell us your protection certificate number.
This is the maximum amount of tax-free lump sums a member can take across all of their pensions combined. The standard LSA is £268,275. However, this allowance is reduced if you became entitled to benefits from other pension arrangements before 6 April 2024; there are special rules which mean that in most cases, by default, 25% of the amount of LTA which you used up before 6 April 2024 will be taken off your overall LSA. Each time you take a tax-free lump sum (i.e. either a Pension Commencement Lump Sum or Uncrystallised Funds Pension Lump Sum) after 6 April 2024, the amount of your available LSA is reduced until it reaches zero (after which any further lump sums which can be paid would be taxed at your marginal rate). Individuals with a protected right to take a higher amount of tax-free cash will continue to be able to do so.
Find out more in our factsheet.
Introduced on 6 April 2024, the LSDBA sets a limit on the tax-free parts of lump sums which can be paid to a member, and in respect of a member on death. It includes Pension Commencement Lump Sums (PCLS), the tax-free element of any Uncrystallised Funds Pension Lump Sums (UFPLS), serious ill-health lump sums and certain tax-free lump sum death benefits. The LSDBA is £1,073,100. However, this allowance is reduced if you became entitled to benefits from other pension arrangements before 6 April 2024. Each time you take one of these tax-free lump sum after 6 April 2024, your available LSDBA is reduced until it reaches zero, after which any further lump sums would be taxed at your marginal rate.
If you reached State Pension Age on or after 6 April 2016, the New State Pension applies to you. The New State Pension is a single-tier pension (unlike the Old State Pension which was made up of two tiers: the Basic State Pension and the Additional State Pension). To get the New State Pension, you'll need at least ten qualifying years on your National Insurance record. These are years when you've been either paying National Insurance or receiving National Insurance credits.
This is the age that your BTPS pension benefits become payable. It’s currently your 65th birthday. You can take your pension earlier than this but, if you do, it will normally be lower. This is because we’ll have to pay it for longer. The current Normal Pension Age applies to benefits built up from 1 April 2009. For benefits built up before 1 April 2009, the Normal Pension Age is your 60th birthday. You must take the benefits you built up before 1 April 2009 at the same time as you take the benefits you built up from 1 April 2009. You can’t take them at different times.
This is a pension from the Government that most people can claim if they reached State Pension Age before 6 April 2016. It’s based on your National Insurance contributions. There are two tiers to the pension: the Basic State Pension and the Additional State Pension – previously known as the State Earnings-Related Pension Scheme (SERPS) and the State Second Pension. The New State Pension replaced the Old State Pension on 6 April 2016.
An Overseas Transfer Allowance will apply to an overseas transfer from BTPS (or any other registered pension scheme) to a qualifying recognised overseas pension scheme (QROPS).
The Overseas Transfer Allowance is £1,073,100 for most people and any transfer in excess of your Overseas Transfer Allowance will be subject to an Overseas Transfer Charge which is currently 25%.
A transfer out of the Scheme of the benefits you built up after 31 March 2009. The remaining benefits you built up before 1 April 2009 would remain within BTPS.
This is a tax-free lump sum that is paid to a member of a registered pension scheme when they start accessing their pension benefit e.g. at retirement. It is often known as “tax free cash” or a “tax free lump sum”.
The maximum Pension Commencement Lump Sum is usually 25% of the pension benefits being accessed. This 25% figure is provided you have sufficient remaining Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA). If you have Lifetime Allowance Protections, you may have a protected right to take a higher PCLS.
There is a risk of high tax charges if you use any part of your PCLS as a contribution to another registered pension scheme as this could be classed as recycling a pension commencement lump sum. For more information visit gov.uk and search under pension recycling.
PIE gives you a higher initial pension in exchange for some of your annual pension increases. You get a higher initial annual pension than you would have otherwise. However, your annual pension increases will be lower than they would have been without PIE. So, while an annual pension with PIE will start higher, eventually it will fall below the same annual pension without PIE. You can only use PIE for pension that you built up before 6 April 1997. Find out more in our Pension Increase Exchange factsheet available on the member portal at btps.co.uk.
This is your basic annual salary. It includes London Weighting and some other allowances, but not overtime. Sometimes it’s called pensionable pay.
A member who hasn’t exchanged any of their Pensionable Salary for other benefits and become a Shadow Salary Member.
This is the amount of time you’ve worked for BT Group and been in BTPS, or the pension schemes that came before it. You might also have ‘bought’ some additional service by transferring another pension into BTPS. And, depending when you joined the Scheme, you could have ‘bought’ ‘Added Years’ as well. It excludes any absences – or non-reckonable days – that don’t count towards it.
This is your Pensionable Service (also known as Reckonable Service) within BTPS. It excludes any absences – or non-reckonable days – that don’t count towards it.
This is where a person takes a pension commencement lump sum and uses it to significantly increase contributions to another registered pension scheme. There are HMRC rules that apply to recycling, which are designed to prevent people exploiting tax relief rules.
When the recycling rule applies, all or part of the pension commencement lump sum is treated as an unauthorised member payment for tax purposes.
The RPI measures the average change in prices over time that consumers pay for a range of goods and services. Unlike the Consumer Prices Index, it includes housing costs, such as council tax and mortgage interest repayments, as well as things like food, clothes and petrol. In 2030, the UK Statistics Authority (UKSA) will change the way RPI is calculated to align it with the Consumer Prices Index Housing (CPIH).
A Shadow Salary Member’s Pensionable Salary if they were a Pensionable Salary Member.
A member who has exchanged some of their annual pay for other benefits.
Someone of the same or opposite sex who is legally married to you.
The Additional State Pension has had various titles over the years. One of these titles is the State Earnings-Related Pension (SERPS). SERPS operated between April 1978 and April 2002. If you paid full Class 1 National Insurance contributions on a certain level of earnings during any of those years, you earned a SERPS pension on top of your Basic State Pension. SERPS was replaced by the State Second Pension which ran until 2016.
This is either the Old State Pension (which includes the Basic State Pension and the Additional State Pension) or the New State Pension depending on when you were born. If you reached State Pension Age before 6 April 2016, you get the Old State Pension. If you reach or reached it after that, you get the New State Pension.
This the earliest age you can claim your State Pension. It used to be 60 for women and 65 for men. But it’s been gradually rising. Between 2010 and 2018 it rose to 65 for women. It's currently 66 for both men and women and will rise to 67 and 68 in future. The Government reviews State Pension Age regularly to make sure it’s affordable and fair. You can check your State Pension Age at gov.uk/state-pension-age.
This is a permanent reduction to your annual BTPS pension when you reach State Pension age. It applies if you were an active member of Section B or Section C of BTPS from 6 April 2009. You can find out more about the State Pension Offset in our State Pension Offset factsheet.
Previously known as the State Earnings-Related Pension (SERPS), this is part of the Old State Pension. It’s paid on top of the Basic State Pension. The amount you get is based on the National Insurance contributions you paid from April 2002 until April 2016.
You get this if you’re a Section C member who left the Scheme between 1 April 1986 and 31 August 1993 and meet certain conditions. If you’re eligible, you’ll get the TSP from your Normal Pension Age until your State Pension Age. Once you reach State Pension Age, the payments stop.
From 6 April 2024, you can request a Transitional Tax-Free Amount Certificate from any of your pension schemes. The application can only be made before the first ‘Relevant Benefit Crystallisation Event’ (RBCE) since 6 April 2024 – which means the first time, after that date, that you start taking money from any of your pensions.
HMRC has advised that the Transitional Tax-Free Amount Certificate would only usually be applied for where individuals can provide complete evidence that, prior to 6 April 2024, they received pension benefits but either did not take a tax-free lump sum or did not take the maximum tax-free lump sum available. You may wish to discuss this option with an independent financial adviser before making an application.
HMRC intend to publish guidance to assist members considering whether to apply for the TTFAC. Please refer to gov.uk for more information.
The Trustee of the BT Pension Scheme (BTPS) acts separately from BT plc. It makes sure the Scheme is run according to the Trust Deed and Rules. The Trustee also holds, manages and invests the Scheme’s assets for the benefit of Scheme members and their beneficiaries.
If you choose a Max tax-free lump sum pension option, the Scheme Rules allow you to take any remaining AVCs as a cash lump sum. This is called an Uncrystallised Funds Pension Lump Sum (UFPLS). Up to 25% of this sum is usually tax-free and the rest is taxed as income dependent on you having sufficient available Lump Sum Allowance, and Lump Sum and Death Benefit Allowance at the time you become entitled to the lump sum.
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