Frequently Asked Questions

New joiner

Introduction to pensions

We want you to get the most from your Railways Pension Scheme (RPS) benefits, but we understand the world of pensions can be challenging and full of jargon.

 

Our Frequently Asked Questions (FAQs) section is here to help you understand your pension benefits, how to get the most from them and support you in making the right choices for your needs.  

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What is a workplace pension?

A workplace pension is a way of saving for your retirement organised for you by your employer while you work for them. It is sometimes called a ‘company pension’, an ‘occupational pension’ or a ‘works pension’.

It's tax efficient - as the money you pay in, or contribute, to your pension is taken from your salary before tax is deducted, reducing the overall amount of tax you will pay on your salary. Your employer also has to contribute to your pension, so together you and your employer are saving for your future.

Put simply, a pension is a savings scheme that you pay into while you are working to help make sure you have regular money coming in when you retire.

Having a pension has always been important but never more so than now, with life expectancy getting ever longer. If you are hoping to retire at 60, or even 68, you could still be looking to support 25 years without that regular income you had when you were working. Many of us don’t want to have to compromise our lifestyles in retirement, so taking an interest in your pension planning is a great way for you to do something positive for the future.

How does a pension work?

A pension works by taking all the money paid in - by you, your employer and the government (in the form of tax savings) - and investing it for your future. Different schemes work in different ways, but the idea is that the investments will grow over time to give you money to support you when you retire.

 


With some schemes, you choose how to invest your money and these are usually referred to as 'money purchase' or ‘defined contribution’ pension schemes. This means you have your own pot of money which can be used to provide an income when you retire. The size of the pot mostly depends on how much has been paid in and how well the investments have performed.


 

Other types of pension scheme work in different ways, with the amount you get when you retire depending on things like how long you've been a member, your final salary when your retire, or the average of how much you've earned over your career. These types of pension schemes are commonly referred to as ‘defined benefit’ or ‘career average’ arrangements.


 

Both these types of schemes are being used by Rail employers, the Railways Pension Scheme (RPS) Shared Cost Sections, which are defined benefit sections, and the Industry-Wide Defined Contribution (IWDC) Section of the RPS. Regardless of which section you are in, once a member you will have access to all the information you need to help you understand more about your pension.

Who pays into my pension?

Like many things in life, saving is a whole lot easier if you don’t have to do it alone. With a pension it isn’t just you saving for your retirement; it’s you, your employer and the government (in the form of tax relief).

 

‘Contributions’ is the name for the money paid into your pension pot*. Contributions can come from:

  • You (or someone paying in on your behalf, for example, your spouse) 

  • Your employer – as a benefit to you to help you secure your future needs, which is a perk you won’t get with other savings schemes! 

  • The government – in the form of tax relief. Although there are lots of ways to save money for the future, a pension can often be the most tax-efficient one while you are working, as your pension contributions will receive tax relief from the government.

 

*Other than administration charges, all your money will be used for your retirement pot.

Who looks after my money?

Financial products don’t always get a good press. It’s comforting then to think the pension scheme has a group of people called the ‘Trustee’ who are responsible for looking after the scheme and all the money invested on your behalf. The Trustee is made up of employer and elected member representatives.
 

Their job, with the help of pension and investment specialists, is to regularly check how the scheme administration and investments are doing and keep you informed of important information. You can learn more about the RPS Trustee.

 

Although investment decisions made by the Trustee are still subject to stock market fluctuations, their experience and expertise ensures that the scheme investments are appropriate for the members. They can’t, however, make investment choices for you personally.

How do I know I'm saving enough for retirement?

Retirement is no longer seen as ‘the end of the road’, and most of us won’t want to change our lifestyles because of it. Why not take the time now to think about what you want or need for your retirement so you can start getting the most out of tomorrow by planning for it today.

The lifestyle calculator in the myRPS section of this website can help you get an idea of what your unique lifestyle costs and therefore what you may still want to be able to pay for once your salary stops.

Log into your myRPS account (or register if you haven't already) and look under 'Planning my future' to try our lifestyle calculator.

How much will I get when I retire?

If you are a member of one of the defined benefit arrangements, the benefits you get when you retire will depend on the rules of your Section, with the benefits provided typically being based on your salary and service at retirement. 
 

You can find out your section’s rules in the ‘A guide for members’ booklet which you can access by registering or logging into the myRPS section of this site here.
 

If you are a member of a defined contribution arrangement, your fund can be used as you wish when you retire. For example:

  • Some of the pot of money that has been saved while you were at work may be available to take as a cash lump sum. 

  • Some of the pot can be  can be used to buy an ‘annuity’ – a retirement income for life. A pension, paid into your bank account, a bit like your salary would have been while working.

 

The amount of total benefits you’ll get depends mostly on:

  • how much has been paid into it, the rules of your section of the RPS; and

  • for defined contribution schemes like IWDC, how well your investments have performed.

 

You do have a choice about how to make your benefits work best for you. For example, you are currently allowed to take a tax-free lump sum when you retire. Your regular income will then be calculated from your remaining pot.

You can also ‘top up’ your pension by paying additional voluntary contributions (AVCs). Your employer will be able to tell you more about how to do this if you want to save more.

Once you’re a member you can register to use the myRPS area of this website. Here you’ll find information about your benefits, the rules of your section as well as handy tools to keep an eye on things and make changes as you needs to.


You can log on or register to use my RPS here.

Is there anywhere else I can get more information?

There are lots of places where you can get more help and advice. Some really useful websites include:
 
The Pensions Advisory Service:

www.pensionsadvisoryservice.org.uk

The Pensions Advisory Service is an independent, non-profit making organisation which provides free advice about pensions. 

Pension Wise

www.pensionwise.gov.uk

A free and impartial government-run service to help members with defined contribution funds understand what their choices are at retirement and how these work.
 
www.unbiased.co.uk

Unbiased.co.uk
For help with independent financial advice or finding IFAs in your local area.
 
Department for Work & Pensions:

www.gov.uk/government/organisations/department-for-work-pensions

www.gov.uk/browse/working

For information about pensions and retirement planning.
 
The Money Advice Service
www.moneyadviceservice.org.uk/en/categories/pensions-and-retirement
Includes retirement advice, types of pension and retirement income, and information on automatic enrolment.