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<p>With the start of the new financial year and the announcements in the Spring Budget, it seems timely to give members a bit of a re-fresher on tax fundamentals. From tax relief - to all of the tax allowances that apply in different situations and making the most of them all – we have it all covered in the next few lines. <br></p><h2>Tax relief on your pension – what is it? </h2><p>When you save for retirement via a pension, some of the money that would normally have gone to the government in tax from your wages, goes towards your pension instead. This is known as tax relief. It increases your savings and can be a substantial amount if it’s saved over many years. <br></p><p>Here’s an example. If you’re a basic-rate taxpayer and want to save £100 into your pension, because of the way tax relief works it will actually only cost you £80. The other £20 comes from the tax relief.<br><br></p><h2>There’s a limit to how much tax relief you can get</h2><p>While you can put as much money as you want into your pension, there are limits on the amount of pension savings that can benefit from tax relief each year and over your lifetime. These amounts are set by the government and may vary at the start of each financial year in April. <br></p><p>A few major pension-related changes were announced on 15 March when Chancellor of the Exchequer Jeremy Hunt presented his Spring Budget. <br></p><p>The main headlines were changes to the amount of tax-free savings members can make each year (the ‘Annual Allowance’) and over their lifetime (the ‘Lifetime Allowance’).<br><br></p><h2>Limits and tax allowances that could affect RPS members</h2><p>Find below a breakdown of the tax allowances that apply to pension savers and further information on the changes that were introduced to them in the Spring Budget. <br></p><p>The main tax allowance affecting members of the RPS who are in a defined benefit (DB) arrangement is the Annual Allowance, but there are other allowances that could apply too. </p><p>&nbsp;</p><h3>Annual Allowance </h3><p>The Annual Allowance (AA) is the limit on your pension savings in a single tax year before you need to pay a tax charge. For the year 2023/2024, this limit is either 100% of your annual earnings, or £60,000 (previously £40,000), whichever is lower. <br></p><p>If you want to consider whether your pension savings will exceed the Annual Allowance, you need to understand how increases in your pension savings are worked out. It’s not as simple as just knowing how much you’ve paid in. You can find out more in the <a target="_blank" href="https://cdn3.railpen.com/mp-sitefinity-prod/docs/default-source/rayn/guides-for-all-members/annual-allowance-tax-limits.pdf?sfvrsn=d6e4ef2d_18">Annual Allowance Read as you Need guide</a> <br></p><p>If you pay Additional Voluntary Contributions (AVC) to BRASS or AVC Extra, these also count towards your Annual Allowance. However, they are considered on a slightly different basis because they are classed as defined contribution (DC) arrangements. </p><p>&nbsp;</p><h3>Money Purchase Annual Allowance </h3><p>The Money Purchase Annual Allowance is a limit on the amount of tax-free pension savings you can make into a defined contribution (DC) pension arrangement. It would only affect you if you take savings from a defined contribution arrangement (which includes Additional Voluntary Contributions) in certain ways. <br></p><p>If you have a DB pension but you pay AVCs (BRASS or AVC Extra) and you start taking money from your AVCs, the amount you can continue paying into your pension and still get tax relief may reduce. This is because AVCs are classed as DC not DB, because they get invested in.<br></p><p>This is known as the Money Purchase Allowance (MPAA). The MPAA will be set at £10,000 (used to be £4,000) from 6 April. <br></p><p>If you start taking money from a DC arrangement and trigger the MPAA, the administrator or scheme manager will send you a flexible access statement to show you have triggered the MPAA. You must then send that statement to schemes where you are still actively accruing benefits. <br></p><p>You can check if you’ve gone above the MPAA using a simple tool on the <a href="https://www.gov.uk/guidance/work-out-your-allowances-if-youve-flexibly-accessed-your-pension" data-sf-ec-immutable="">government’s website</a>. <br></p><p>More information on the MPAA is available in your <a target="_blank" href="https://cdn3.railpen.com/mp-sitefinity-prod/docs/default-source/rayn/guides-for-all-members/annual-allowance-tax-limits.pdf?sfvrsn=d6e4ef2d_18">Read as you Need guide</a>. </p><h3>&nbsp;</h3><h3>Tapered Annual Allowance </h3><p>The Tapered Annual Allowance (TAA) generally applies to those on the highest incomes. This allowance gradually reduces the amount you can save into your pension plan annually depending on your income. &nbsp;It may affect you if your income is over £260,000 (previously £240,000) from 6 April 2023. </p><p>&nbsp;</p><h3>Lifetime Allowance </h3><p>The Lifetime Allowance (LTA) is the limit on the total amount of pension savings you can make in your lifetime without having to pay tax when you come to claim them. If your savings have exceeded the limit, you’d need to pay a tax charge on any amount over the allowance. The LTA limit has been frozen at £1,073,100 and it was announced 2 years ago that it won’t be changed until 2026. <br></p><p>It was, however, announced last month that the LTA will be abolished completely from 6 April 2023. This means that no one will face a LTA tax charge with the start of the new financial year. <br></p><p>As a result of the abolition of the LTA, the maximum amount most members can take as a lump sum will be frozen at £268,275, which is 25% of the current standard lifetime allowance of £1,073,100. However, members with a protected right to a higher lump sum on 5 April 2023 will continue to be able to access this right.</p><p><br></p><h2>How will I know if I’ve exceeded my allowances? </h2><p>If your pension savings in the RPS are greater than either the AA, or the MPAA, then we will send you a Pension Savings Statement (PSS). This will show how much of your allowance you have used. <br></p><p>You can apply to carry forward any AA that you haven’t used from the previous 3 years to the current tax year. However, no carry-forward is available for MPAA. </p><p>&nbsp;</p><h2>Making the most of your allowances</h2><p>With the challenging financial times we are all facing, making the most of your tax limits may not be a priority at the moment. Everyone’s situation is different, though, and it’s always helpful to know your options in case spending a little more towards your pension seems like a logical step. To get the most out of your limits, you might want to consider paying in as much as you can before the tax year is up. This doesn’t necessarily mean paying in the full allowance but paying in as much as you are able to at the time. </p><p>&nbsp;</p><h2>Enhance your understanding of the topic of tax</h2><p>You can find more details in our online <a href="/knowledge-hub/help-and-support/RAYN">Read as you Need guides</a>, as well as a <a href="/knowledge-hub/help-and-support/video-library">series of short videos</a>. <br></p><p>For more information on pension tax relief, check out the <a href="https://www.moneyhelper.org.uk/en" data-sf-ec-immutable="">Money Helper website</a> or try the <a href="https://www.which.co.uk/money/pensions-and-retirement/pensions-and-retirement-calculators/pension-tax-calculator-avRmf8S2yxd1" data-sf-ec-immutable="">Which? pension tax relief calculator</a>. It shows you how much tax relief you get based on your pension contributions.</p><p>&nbsp;</p><p><em>&nbsp;</em></p><p><em>We will be updating our website content and guides over the coming months to reflect the changes announced as part of the Spring Budget 2023, so please refer to this blog or </em> <a href="https://member.railwayspensions.co.uk/knowledge-hub/news-and-views/news-updates/2023/03/15/spring-budget-announcements" data-sf-ec-immutable="" data-sf-marked=""><em>this news article</em></a><em> in the meantime for the 2023-24 tax year figures.</em></p>

<p>If you're thinking about moving abroad permanently or buying a second home outside of the UK, read on for the details you need to know.</p><p><strong>You can have your pension paid into an overseas bank account</strong></p><p>If you’re changing from a UK bank account to an overseas bank, it’s important to make sure your details, and the details of your new chosen bank are correct. </p><p>Once you’ve registered with your chosen bank, the best way for us to verify the bank and your details is through you obtaining and sending us a bank statement from your new bank. When we receive this, we’ll send it to Citibank, the company we use to exchange your pension into your new country’s currency, and they’ll be able to vet this new bank quickly. This will speed up the process of getting your pension to your new bank account.</p><p>If you’ve got an overseas bank account, it costs £2 a month (£26 per year from us), which we’ll offset by getting a good exchange rate through Citibank. You’ll need to check with the overseas bank if there’s a charge for receiving an overseas payment.</p><p><strong>Can you still use a UK bank account to receive your pension? </strong></p><p>If you plan on keeping your UK bank account, we’ll pay you in the same way as if you were living in the UK. However, it’s important to check you can maintain a UK bank account without a UK address and that will depend on your current UK bank. </p><p>If you’re closing your UK bank account, you’ll need to <a href="/defined-benefit-members/Im-taking-my-pension/updating-bank-details">complete a form with the details of your overseas bank</a>.</p><p><strong>If you’re thinking of transferring to a scheme overseas…</strong></p><p>Transferring can take a couple of days because of the additional process. You can find more information about transfers <a target="_blank" href="https://cdn3.railpen.com/mp-sitefinity-prod/docs/default-source/rayn/guides-for-db-members---active-and-preserved/transfer-options.pdf?sfvrsn=54d41644_13"><strong>here</strong></a>.</p><p><strong>You’ll still receive written correspondence from us</strong></p><p>Pension documents will still be sent to you overseas, such as your:</p><ul><li>Annual Benefit Statement (ABS) </li><li>Summary Funding Statement (SFS)</li><li>Pension saving statement</li><li>Newsletters</li></ul><p>In some countries, the postal service may take longer for you to receive your documents for us, so it’s important that you research this. However, by <a href="/register">registering for your myRPS account</a>, you can access all your important pension documents online.</p><p>We’re currently exploring giving members the option of opting out of paper communications and will update you with our progress. </p><p><strong>Impact on cost of living increases to State Pension if you’re over State Pension age</strong> </p><p>With certain countries, your UK State Pension will be fixed and you may not receive any cost of living increases to it.</p><p>Further information about the State Pension if you retire abroad is available on the <strong>Gov.uk</strong> website at <strong><a href="https://www.gov.uk/state-pension-if-you-retire-abroad" data-sf-ec-immutable="">gov.uk/state-pension-if-you-retire-abroad</a></strong>.</p>

<p>If you’re thinking about ways to cut down on your costs, you’re not alone. Around 3 in 4 adults feel ‘very or somewhat worried’ about the rising costs of living. As a result, many of us are now spending less on non-essentials, according to research from the Office of National Statistics (ONS). </p><p>While contributing to your pension may not seem like a necessity now, it could make all the difference to your life after work. </p><p>Here’s how a freeze on your pension contributions today, could melt your retirement plans tomorrow.</p><p>&nbsp;</p><h4>You could lose the valuable benefits of your RPS pension</h4><p>Your membership in the Railways Pension Scheme (RPS) comes with many <a href="https://member.railwayspensions.co.uk/defined-benefit-members/im-still-working/membership-benefits" data-sf-ec-immutable="">fantastic benefits</a>. Freezing your contributions may put some, or all of these benefits at risk.&nbsp;</p><ul><li><h3>You’re not saving alone</h3><p>While you pay into your RPS pension, your employer pays in too. That means more money into your pension savings, at no cost to you. </p><p>As a defined benefit (DB) member, your employer will pay in at least 60% of the value of your retirement benefits, which is usually 1.5 times your contribution. DB members can <a href="https://member.railwayspensions.co.uk/defined-benefit-members/im-still-working/my-payments" data-sf-ec-immutable="">learn about their payments here.</a></p><p>Industry-Wide Defined Contribution (IWDC) members can <a href="https://member.railwayspensions.co.uk/iwdc-members/Im-still-working/my-payments" data-sf-ec-immutable="">learn more about their payments here</a>.</p><p>If you stop paying into your pension, your employer will normally stop paying in too. Even if you freeze or reduce your contributions for a year, you could miss out on a large sum of pension money when you retire.</p></li><li><h3>Your contributions are tax-free</h3><p>The government supports your pension saving journey with <a href="https://member.railwayspensions.co.uk/pension-essentials/pension-tax-limits" data-sf-ec-immutable="">tax relief on your pension contributions</a>. The money you pay into your pension is taken from your salary, before you pay tax on it. So, the money which would have been taken as tax goes towards your pension savings instead.</p><p>For example, if you pay basic-rate tax (20%), and you want to save £100 into your pension, because of the way tax relief works it will only cost you £80. The other £20 comes from tax relief. </p><p>You also benefit from tax relief on any Additional Voluntary Contributions (AVCs) you make. AVCs are extra contributions you pay into the Scheme, on top of the contributions you and your employer pay in.</p><p>The main AVC arrangement for defined benefit (DB) members is called BRASS. <a href="https://member.railwayspensions.co.uk/defined-benefit-members/saving-more-BRASS-AVC-Extra/saving-more-with-BRASS" data-sf-ec-immutable="">You can find more information about BRASS here</a>. </p><p>If you’re an IWDC member, you can save more by paying more contributions. <a href="https://member.railwayspensions.co.uk/iwdc-members/Im-still-working/saving-more" data-sf-ec-immutable="">IWDC members can learn how to save more here</a>.</p></li><li><h3>Your pension is prepared for the unexpected</h3></li></ul><p style="margin-left: 30px">Life is full of twists and turns, and your RPS pension is here to support you through those times, too. If you die before you take your RPS pension, your loved ones might get a <a href="https://member.railwayspensions.co.uk/knowledge-hub/help-and-support/reporting-a-death" data-sf-ec-immutable="">tax-free lump sum death benefit</a>. Remember, if you stop contributing to the Scheme while you’re still working, you will lose the Scheme’s valuable death in service cover. <br></p><p style="margin-left: 30px">As the saying goes, you never know what’s around the corner. If you need to stop working completely due to ill-health, you may be able to start taking your RPS pension and cash lump sum straight away, even before your Normal Retirement Age (NRA). This is known as an incapacity pension. <br></p><p style="margin-left: 30px">If you become seriously ill and your life expectancy is less than 12 months, you may be able to take your RPS pension benefits a one-off lump sum payment. This is called a serious ill health lump sum. <br></p><p style="margin-left: 30px">DB members can <a href="https://member.railwayspensions.co.uk/defined-benefit-members/im-still-working/changes-to-circumstances" data-sf-ec-immutable="">learn more about incapacity benefits here</a>.</p><p style="margin-left: 30px">IWDC members can <a href="https://member.railwayspensions.co.uk/iwdc-members/Im-still-working/changes-to-circumstances" data-sf-ec-immutable="">find out more about incapacity benefits here</a>.</p><p>&nbsp;</p><h4>The less you pay in now, the less you’ll have later</h4><p>You pay into your pension while you’re working, to give you a retirement income when you’re no longer working. It may seem obvious, but the less you pay in now, the less money you’ll have when you retire. </p><p>It’s great we’re living longer, but have you thought about what it might mean for your pension? According to the Office for National Statistics (ONS), the average life expectancy for a male born in the UK is 88 years, with a 1 in 4 chance of living to age 97.* </p><p>With potentially more years ahead of us, our pension savings may need to support a longer retirement. If you freeze your pension contributions now, it may mean you’ll need to continue working longer than you had hoped to, to pay for your life after work. </p><p>If you were to stop paying into the Scheme for a few years but started paying in again at a later date, you may lose out on the Scheme membership you would have built up in that time, if you had been paying in continuously. Remember, you will not be able to buy additional years’ Scheme membership, which might mean you need to keep working longer to build up your membership again.</p><h4>&nbsp;</h4><h4>Your pension is an investment for your future</h4><p>Are you familiar with the pension term, ‘compounding’? It’s how your pension savings grow as they’re invested. </p><p>The money you and your employer pay into your pension, plus any tax relief is invested by the Scheme’s administrator, Railpen. Compounding is when your pension money grows as it’s invested, and then the growth on investments also grows over time. </p><p>A freeze on your contributions, even for a short time, could disturb the compounding that happens when you regularly pay into your pension. Plus, it could be hard to get back into the habit of paying into your pension. So, it’s a good idea to keep saving, if you can. </p><p>Compounding only directly impacts members of the Industry-Wide Defined Contribution (IWDC) section, and members who pay in Additional Voluntary Contributions (AVCs), such as BRASS.</p><h4>&nbsp;</h4><h4>Your State Pension might not be enough</h4><p>You’ve probably thought about what you’d like to do in retirement. Maybe some work on the house, take up a new hobby, or do some travelling. But all of those things come at a cost, and your State Pension alone might not be enough to cover them. &nbsp;</p><p>The full new single-tier State Pension for 2023/24 is currently £203.85 per week. That’s around £10,000 a year. While the State Pension is set to increase, remember that life’s other costs, such as bills and holidays are likely to increase, too. </p><p>Plus, you may have to wait until your late 60s to claim your State Pension. The State Pension age (SPA) is currently 66 for both men and women, and will increase to age 67 in 2026-2028.</p><p>While the State Pension is a great place to start with saving for retirement, you might need to top it up with your RPS pension savings to enjoy the things you want to do in later life. </p><p>For a personalised estimate of how much you might need when you retire, try the <a href="https://member.railwayspensions.co.uk/knowledge-hub/help-and-support/retirement-budgeting-calculator" data-sf-ec-immutable="">Retirement Budgeting Calculator in your myRPS account.</a> The calculator lets you add your individual costs, to work out how much money you might need to pay for the retirement lifestyle you want. </p><h4>&nbsp;</h4><h4>Where to go for support</h4><p>It’s important you think long and hard before freezing your pension contributions or making any changes to your pension savings. </p><p>If you pay in Additional Voluntary Contributions (AVCs), and you have no other option but to cut back on your spending, you could reduce the amount you pay in. Or, you could take a break from paying into AVCs for a short time. But it’s important that you keep paying into your main Scheme benefits, if you can. </p><p>To weigh up your options, you could speak to your employer, or talk to a financial adviser. You can find a <a href="https://member.railwayspensions.co.uk/pension-essentials/guidance-advice" data-sf-ec-immutable="">list of specialist sites and professional advisers here</a>. </p><p>If you’re looking for tips to manage your money, try the <a href="https://member.railwayspensions.co.uk/login" data-sf-ec-immutable="">MoneyFit tool in your myRPS account</a>. MoneyFit gives you a personal action plan with advice to help you save into your pension in the future.&nbsp; &nbsp;</p><p>Paying into your RPS pension is one of the most secure ways to plan for your future. If you think about your long term goals now, your future self will thank you later. </p><p>*<em>Figures are correct as of March 2024, but may change. To check the latest figures, visit </em><a href="http://www.ons.gov.uk/" data-sf-ec-immutable=""><em></em></a><em><a href="http://www.ons.gov.uk" target="_blank" data-sf-ec-immutable="">www.ons.gov.uk<em>.</em></a>&nbsp;</em></p>