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BTRSS: Change to Default Investment

7 December 2014

The Union has been advised of a change to the default investment strategy by the BT Retirement Saving Scheme (BTRSS). The new arrangement aims to provide a better balance between risk and return and there will be changes in fund charges. The changes will be made automatically for some BTRSS members and this will incur an initial one off charge.

The changes being made by Standard Life are supported by BT and the BTRSS Governance Committee, which includes union representatives.

Background

When someone joins the BTRSS their payments are automatically put into a default or Lifestyle investment profile that is an appropriate option for most members. A Lifestyle fund invests in growth assets when members are younger and then moves savings from higher risk growth investments to lower risk fixed interest and cash investments as members get nearer to their selected retirement age.

Standard Life calls the default fund the low-involvement strategy because it is an easy to use approach for people who do not want to be actively involved in choosing their own investment funds. It is the option that is used by the overwhelming majority of BTRSS members.

The New Arrangements

The general default investment strategy was called the BTRSS Lifestyle Profile but this changed on 1 November 2014. The new default strategy will be called the Strategic Lifestyle Passive Plus III Profile, and this will now be the default fund.

The Profile aims to provide a better balance between risk and return than before. The new default fund is regularly monitored by Standard Life who can change what it invests in as and when necessary.

Changes in Charges

There will be changes to the charges as a result of the new arrangements. The exact implications will depend on which default an individual is currently using. There are a number of defaults in the BTRSS as a result of arrangements linked to former BT pensions.

The effective total annual fund charges for the growth phase of the different defaults are currently as follows:

  • BT Retirement Plan Lifestyle Profile 0.47%.
  • Syntegra Lifestyle Profile 0.48%.
  • Current BTRSS Lifestyle Profile 0.30%.
  • New BTRSS Strategic Lifestyle Passive Plus III 0.35%.

BTRSS members are currently being sent letters to their home addresses about this change.

Change to the New Default

Standard Life made the changes to the default investment for people joining the BTRSS on 1 November 2014.

BTRSS members who joined the BTRSS before that date can continue with their existing investment arrangements, or they can choose to move to the new default strategy if they want to. However, some members will be moved to the new arrangements automatically – see below.

Former BT Retirement Plan Members – Automatic Transfer

Some members of the BTRSS who used to be members of the BT Retirement Plan (BTRP) will be moved to the new default investment automatically on 15 January 2015 unless they contact Standard Life.

This will happen if they meet all of the following criteria:

  • were previously in the BTRP and moved across to the BTRSS in 2009;
  • are in the BTRP Lifestyle Profile fund and have not made investment choices since joining the BTRSS;
  • are more than 7 years from their selected retirement age.
  • In this situation member contributions will be automatically moved to the new default option unless members tell Standard Life they do not want this to happen by 15 December 2014.

    While the standard charges for the new default is lower than the current normal charge for this group (see above), there will be an initial one off cost associated with transferring into the new default. This is caused by the costs of selling and buying the assets. The amount cannot be confirmed in advance but Standard Life is suggesting that this will be between 0.65% and 0.9% of each individual’s total investments.

    The fact that there is a charge associated with this change is disappointing. The CWU believes that the cost of the transfer should have been absorbed by either BT or Standard Life. However, neither has been willing to cover the costs of the change.

    Next Steps

    All BTRSS members should consider this issue carefully and read the information they received from Standard Life before making a decision about what option is most suitable for them.

    It is important to stress that the decision about which investment strategy to adopt is down to individual members of the BTRSS. The CWU is legally prohibited from offering financial advice.

    If any member wants financial advice then they should speak to an independent financial adviser, and these can be found via http://www.unbiased.co.uk or 0800 085 3250.

    If members have queries about these changes then they should contact Standard Life on 0800 066 5432 in the first instance.