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10 things to know about pensions

A whistle-stop guide to 10 pension basics that you should know to help you towards a better retirement.

There are different types of pension - understand yours

A pension is a savings plan to provide income for when you retire. There are tax advantages compared with other types of savings.

There are 3 main types of pension:

  • Workplace pension

A workplace pension is set up by your employer to help you save for retirement. It's sometimes known as an occupational or company pension. You and your employer both pay regular contributions and the government gives you tax relief (up to certain limits). So it's a great benefit to have. The British Transport Police Force Superannuation Fund (BTPFSF) is a workplace pension.

  • Private pension

Also known as a personal pension, this is arranged privately by you. You set up regular contributions and the government gives you tax relief on the money you pay in (up to certain limits).

  • State Pension

This is a regular payment from the government once you reach State Pension age. Eligibility depends on your National Insurance record. Even if you can get the State Pension, on its own, it may not provide you with enough income to live on comfortably in retirement. You can read more on the State Pension page.

Your pension in the Fund

There are 2 types of pensions that exist in the UK – Defined Benefit (DB) and Defined Contribution (DC). Your BTPFSF workplace pension is a DB pension. If you save extra towards it, any additional contributions you’ve made will be classed as Defined Contribution (DC).

1. Defined benefit (DB)

A defined benefit (DB) scheme pays you a retirement income based on your salary and how long you've been a member of the scheme, rather than on the amount of money you've contributed to the pension.

The Fund’s Sections are defined benefit sections. The 1970 and 2007 Sections are 'final salary' schemes and give you a guaranteed income for life, based on your final or final average salary. The CARE Section is a Career Average Revalued Earnings arrangement, where your pension is based on your earnings right across your membership. With this arrangements, your benefits will increase each year to keep their value against inflation.

You can find out more in the ‘In the Fund’ area of the website.

2. Defined contribution (DC)

A defined contribution (DC) scheme builds up a pension pot to be used in retirement. The size of the pot will largely depend on how much you and/or your employer contribute and how much this grows through investment returns.

The management of the Fund

A group of employer and member elected representatives, known as The Trustee, oversees the management of the Fund including collecting contributions and paying benefits.

The Trustee regularly checks that the Fund is being managed in line with their expectations and keeps you informed via the Fund's administrator, Railpen. If you’d like to find out more about the Trustee, go to the Trustee page.

The benefits of your workplace pension

Your Fund pension has many important advantages and benefits.

  • Your employer contributes too

What sets a workplace pension apart from a personal pension and other savings options is that your employer normally contributes as well.

  • You get tax relief

Another key benefit is tax relief. Tax relief is given based on the rate of income tax that you pay.

In the Fund, your pension contributions are deducted before you're taxed. That means you will usually pay less tax, because your tax will be calculated based on a lower amount of UK earnings.

  • Your pension could benefit those you care about

A tax-free lump sum of money could be paid to your loved ones if you die before claiming your pension or if you die in service. Your dependants (usually family) may also get a pension.

You can read more on the nominations for death benefits page.

  • It's easy to manage your Fund pension online

You can use your myFund account to view all your membership and pension information in one place. You can also edit your details, request estimates and access a range of easy to use pension calculation and planning tools.

Investments and what they mean for you

Investments play a part in most pensions. Exactly how depends on the type of scheme you're in.

The Fund is a DB workplace pension scheme so the money you pay in is combined into a range of carefully selected, pooled investment funds, along with the contributions paid by other members. This is to benefit from economies of scale and helps to pay all members' benefits.

The investment performance does not directly affect how much you will get in retirement because this is typically based on your final pensionable salary over your last year of service and the amount of pensionable service you have at retirement but it does help to keep the rate of contributions down.

Investments for Additional Voluntary Contributions (AVCs)

If you pay more into your Fund pension, by making Additional Voluntary Contributions (AVCs) you have similar investment choices to the DC investments described above.

You can find out more about AVCs in point 5 below. Or you can check the saving more page.

Tax relief, tax allowances and your pension

You get tax relief on your contributions but can only save tax-free up to a certain limit.

The great advantage of saving for retirement via a pension, is that some of the money that would normally have gone to the government in tax, goes towards your pension instead. This makes your contributions cheaper and increases your pension savings. This can be a large amount if it's saved over many years.

You can put as much money as you want into your pension but there are certain limits which can affect the amount of tax relief you're allowed. If you exceed these limits, you may have to pay a tax charge, so it's worth knowing what they are.

You can find out more about tax relief and learn about the different types of tax allowance and their limits on the pension tax limits page.

Saving more into your pension with Additional Voluntary Contributions

While your Fund pension provides good benefits, you may wish to save even more for your life after work. 

You can do this in a tax-efficient way by making Additional Voluntary Contributions (AVCs).

AVCs are popular with Fund members because:

  • you don't need to save a set amount every month, although most people do
  • it's a great way to save extra for retirement if you get payments that don't qualify for your pension
  • you get tax relief (at your marginal tax rate) on anything you put in (up to the limits of the Annual Allowance)
  • you can put in as little as £2 per week

Visit the saving more page for more information about AVCs.

If you want to start making AVCs, you will need to speak to your employer.

Life changes and your pension

Your pension, or how much you pay into it, may be affected if your circumstances change.

This could include:

  • Taking family leave
  • Suffering from ill-health
  • Getting divorced or the dissolution of a civil partnership
  • Changing your working hours
  • Death

You can find more details of how a change in circumstances could impact payments into your pension and/or the benefits you will get on the pages below or in your Member Guide when you log into your myFund account.

Planning ahead for your retirement

If you know what your income is likely to be when you retire, it’s much easier to steer a clear course to retirement. 

As a first step you can request an estimate of your pension when you log into your myFund account. An estimate shows you what your benefits might be when you retire, based on your current pension payments. You can request an online estimate any time. Simply log into your myFund account.

Then, to find out how much you might need to live on in retirement, you can use the Retirement Budgeting Calculator. This uses figures from the Pensions and Lifetime Savings Association (PLSA) Retirement Living Standards to help you picture what kind of lifestyle you'd like in retirement and how much this could cost after tax.

If there's a shortfall between how much you're likely to get and how much you'll need, you might want to think about making some changes. This could include making Additional Voluntary Contributions (AVCs).

You can find out more on the following pages depending on the section you’re a member of :

Other solutions could include taking your pension later or adjusting your lifestyle plan.

You can find out more about the options available to you in the planning to take my pension section.

Taking your pension or PRA

You have several options available for taking your pension benefits and your pot of money if you’ve paid AVCs also known as 'Personal Retirement Account'.

Your options will differ depending on the type of pension you have. In summary...

  • Take part of your pension benefits as a cash lump sum and the rest as regular pension payments. It's up to you how you divide this up. You may be able to take up to 25% (but no more than £268,275) as a cash lump sum, tax free.
  • Take your entire pension benefits as regular pension payments. This is only possible if the rules of your particular pension section allow it.
  • In limited circumstances, you can take your entire benefits as a cash lump sum.
  • It's important that you understand the benefits and limitations of each of these options before making a decision. You can find out more on the ways to take my pension page.
Taking your PRA

If you have paid into AVC Extra and/or BRASS, you must take these benefits at the same time as your main ​Fund benefits, or transfer them to another arrangement if you want to claim them earlier or later.

We strongly recommend that you seek independent financial advice from an adviser who is authorised by the Financial Conduct Authority (FCA) before making any transfers.

For more information about your options, read the following pages:

Other benefits you might get in retirement

The benefits described below are from the government and are not connected to the British Transport Police Force Superannuation Fund. 

State Pension

This is a regular payment from the government once you reach State Pension age. Whether you can get it or not depends on your National Insurance record.

You can find more information on the State Pension page or go to the government website.

Pension Credit

This is a payment from the government which could help you with your living costs if you're over State Pension age and on a low income. Pension Credit is separate from your State Pension, and you may still be able to claim it even if you have another income, savings, or are claiming another pension.

To claim Pension Credit, you must have reached State Pension age and live in England, Scotland, or Wales.

You can find out more at gov.uk/pension-credit.

Sources of external support

You'll find plenty of information about your pension throughout this website and when you log in to your myFund account. 

If you need further support, you'll find a list of specialist websites and information on how to find a financial adviser when you read the guidance and advice page.

If you're already retired, you can find details of support groups, charities and other organisations on the useful contacts page.