Blog
A deep-dive into a variety of pension topics to help you understand and learn more about your pension and the Scheme.
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16/5/2025
Editorial
<p>The answer is that this will depend on how long you’ve been a member, your Pay and the rules of the Section of the Scheme you are in. </p><p><strong>It’s a complex calculation and you may have several options, and the easiest, and most <span style="text-decoration: underline">accurate </span>way for you to get an understanding of what your DB pension benefits might be worth is to request an estimate in your </strong><a href="/login"><strong>myRPS account</strong></a><strong> or by contacting us directly. </strong></p><p>If you still want to learn more about what your pension benefits are based on, then you’ll find an overview in your Member Guide and summarised below. </p><p>Please bear in mind that this is an illustrative, and generic example, to be used for information purposes only. Rules may vary by Section and outcomes will be highly dependent on your individual circumstances. </p><p>If you’re a member of the Industry Wide Defined Contribution (IWDC), the value of your Personal Retirement Account (PRA) is paid in a different way. You can read more about that in a separate blog post: <a href="https://member.railwayspensions.co.uk/knowledge-hub/news-and-views/blog/rps-blog/2025/05/16/understanding-the-value-of-your-pra-for-iwdc" data-sf-ec-immutable="">The value of your PRA for IWDC</a>. </p><h3>The basis for a defined benefit calculation in the RPS </h3><p>In general, a defined benefit (DB) scheme like the Railways Pension Scheme (RPS), pays you a regular income for life when you retire. </p><p>In most sections, this income is broadly based on your final or final average pay and how long you’ve been a member of the Scheme. </p><p>You can also choose to take a tax-free cash lump sum. </p><p>In this blog, we’ll use an example of how your pension and the separate tax-free cash lump sum would be calculated, if you had a final average pay of £50,000 and Scheme membership of 25 years and 30 days. </p><p>This example does not include any Additional Voluntary Contributions (AVCs), including BRASS or AVC Extra, which can impact how your pension benefits are paid. Please visit the <a href="/defined-benefit-members/saving-more-BRASS-AVC-Extra">saving more area </a>to find out more about how you can take your BRASS or AVC Extra pots. </p><p>If you are a member of a Career Average Revalued Earnings (CARE) DB arrangement in the RPS your calculation would be slightly different and you can find out more in your Member Guide. </p><h3>Example of how DB pension payments are calculated in the RPS<strong></strong></h3><p><img src="https://cdn3.railpen.com/mp-sitefinity-prod/images/default-source/infographics-(current)/how-an-rps-pension-is-calculated-v2.png?sfvrsn=17f72fae_3" width="800" alt="A graphic showing how a DB pension in the RPS is calculated"></p><p><strong>1. </strong><strong>As outlined above, in many Sections, we use final average pay as a starting point for the pension calculations.</strong> </p><p>This may be different in your Section of the Scheme and you can find more information in your Member Guide. </p><p>For this example, we will use a final average pay of £50,000. </p><p>Final average pay is set by your employer and is defined as, your Pay or Pensionable Pay (whichever is higher) averaged over the 12 months before you: </p><ul><li>take your pension</li><li>leave the Scheme or </li><li>die</li></ul><p><em>Your Pensionable Pay is the amount of your total salary your employer decides is pensionable on the 1 April each year.</em> You can find more definitions for key terms on the <a href="/knowledge-hub/help-and-support/glossary">glossary page</a>. </p><p><strong>2. In most sections, in line with the Scheme rules, a value of 1.5 times the Basic State Pension is then deducted (or ‘offset’) from the calculation when your pension is worked out. </strong><a id="_anchor_2" href="https://railpen.sharepoint.com/sites/CustomerExperienceFunction/ProjectsActive/RAIL/RPS/Web/RPS%20website%20-%202024%20onwards/Content/4%20-%20Knowledge%20hub/2%20-%20News%20and%20views/Blogs/Approved%20-%20how%20we%20calculate%20pension%20benefits%20blog%20v3.docx#_msocom_2" name="_msoanchor_2" data-sf-ec-immutable=""></a></p><p>This was originally included in the rules to ensure members would receive a good income after 40 years membership, relative to their final average pay, and when their Scheme pension was considered in combination with the State Pension. <br></p><p>The amount of the Basic State Pension is set by the government. It can change over time and usually goes up every year. You can read more on the <a href="/pension-essentials/state-pension">State Pension webpage</a> or at <a href="https://www.gov.uk/browse/working/state-pension" target="_blank" data-sf-ec-immutable="" data-sf-marked="">gov.uk</a><br></p><p>For this example we have used £8,667 as the final average Basic State Pension amount. </p><p><strong>3. We then divide the remaining total by 60</strong><a data-sf-ec-immutable=""></a></p><p>This is based on the pension accrual rate set in the Scheme rules. </p><p><strong>4. The final step is to multiply by the number of years and days of Scheme membership</strong> </p><p>For example, if someone has been a member in the Section for 25 years and 30 days we would multiply by 25.082191.<br></p><p>30 days are divided by 365 days to give 0.082191 and with 25 years added, this gives a total membership period of 25.082191. <br></p><p>That gives us the total yearly pension the member is entitled to, per year, before tax </p><p>In this example, it would be £15,467 per year before tax is taken. In line with the scheme rules, we pay pensions on a four-weekly basis. </p><p>Please remember that this is a generic example, and the figures may vary depending on your individual circumstances and options, for example if you choose to take a higher lump sum (see below), or have paid into BRASS. <br></p><h3>Example of how a lump sum is calculated in the RPS</h3><img src="https://cdn3.railpen.com/mp-sitefinity-prod/images/default-source/infographics-(current)/how-your-lump-sum-is-calculated.png?sfvrsn=d9842561_2" width="800" alt="An equation showing how a lump sum is calculated "><p>Generally, as a defined benefit member, you may be able to take up to 25% of your pension benefits (but no more than £268,275) as tax-free cash, with the rest being used for regular pension payments as outlined above. </p><p>The rules of the RPS provide a lump sum, in addition to your Scheme pension. This is calculated separately and means you have to give up less of your Scheme pension if you want to take more tax-free cash.</p><p>In this example the basic lump sum would usually be calculated as follows:</p><p><strong></strong><strong>1. Starting with final average pay</strong> </p><p>We’ve used £50,000 again in this example but you can read more about how final average pay is defined in point 1 of the pension calculation above. </p><p><strong>2. Dividing it by 40</strong><br></p><p>This is based on the lump sum accrual rate set in the Scheme rules (and is different to the pension accrual rate outlined above).</p><p><strong>3. Multiplying that by the number of years and days of Scheme membership</strong> </p><p>Again, we’ve used 25 years and 30 days for this example (25.082191) as per the pension calculations above. </p><p><strong>4. This gives us the member’s basic lump sum amount</strong> </p><p>In this case it would be £31,352 <br></p><h3>A few other factors to bear in mind… </h3><p>The calculations above, are intended as a generic illustration, based on the basic pension and lump sum amounts being paid at Normal Retirement Age or Normal Pension Age. </p><p>However, there are other options to consider when taking your pension benefits. For example, you may be able to:</p><ul style="margin-left: 30px"><li>Take a higher cash lump sum (subject to limits) and less pension </li><li>Take a smaller cash lump sum and more pension </li><li>Take all your pension benefits as regular pension payments - this is only possible if the rules of your particular pension section allow it.</li><li>Take all your pension benefits as cash - this is only possible in limited circumstances. </li><li>Give up part of your own pension entitlement in order to give extra pension to your dependants. This is not the same as a spouse or dependants’ pension, which is paid from the Scheme to those who are eligible under the rules. </li><li>Take the level pension option – this means you can level out your pension benefits alongside what you will receive as your State Pension. With this option, you get more pension from the RPS before your State Pension age and then less pension from the RPS after your State Pension age</li><li>Take your benefits earlier, or later</li></ul><p><span style="background-color: rgba(0, 0, 0, 0); color: inherit; font-family: inherit; font-size: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit">All of these options would affect the basic calculations outlined above.</span></p><p>You can read more about your options for taking your pension benefits on the <a href="/defined-benefit-members/Im-planning-to-take-my-pension/ways-to-take-my-pension">ways to take my pension page</a>. </p><p>You can also use the pension planner in your <a href="/login">myRPS account </a>to see what your pension and tax-free cash payments might be worth when you retire. <a id="_anchor_9" href="https://railpen.sharepoint.com/sites/CustomerExperienceFunction/ProjectsActive/RAIL/RPS/Web/RPS%20website%20-%202024%20onwards/Content/4%20-%20Knowledge%20hub/2%20-%20News%20and%20views/Blogs/Approved%20-%20how%20we%20calculate%20pension%20benefits%20blog%20v3.docx#_msocom_9" name="_msoanchor_9" data-sf-ec-immutable=""></a></p><p>If you'd like more details about your estimated pension benefits and options, please request an estimate in your myRPS account or by contacting us directly. </p><p>If you need help requesting an estimate online you can watch this short video guide:</p><div data-sf-ec-immutable="" class="-sf-relative" contenteditable="false" style="width: 560px; height: 315px"><div data-sf-disable-link-event=""><iframe width="560" height="315" src="https://www.youtube.com/embed/VALJs1qoyTw?si=Orofg4_PBcvxC6oo" title="YouTube video player" sandbox="allow-scripts allow-same-origin allow-presentation allow-popups"></iframe></div></div><p> </p><p>We strongly suggest that you consider seeking independent financial advice before making any final decisions. You can find details about how to do that on the <a href="/pension-essentials/guidance-advice">guidance and advice page</a>.</p>
How we calculate DB pension benefits
One of the questions we most often get asked, is how we work out what pension benefits a defined benefit (DB) member should get.
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