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Here’s some of the key things you need to know about tax, and how it could benefit you and your pension. Please bear in mind that tax allowances are set by the government and are subject to change. You can get the latest updates at gov.uk. 

Tax relief

Saving with your RPS pension is tax efficient, because the money you pay in is taken from your salary before tax is deducted. That means you pay less tax on your salary and save more instead.

For example, if you’re a basic-rate tax payer (who pays 20% income tax) putting £100 into your pension, would only cost you £80, and the other £20 comes from tax relief.

You can learn more about tax relief in this short video: 

The Annual Allowance

The Annual Allowance (AA) is a limit on the amount of your pension savings that can benefit from tax relief each year.

It means the most you can save tax-free in all your pension arrangements in a single tax year is the lower of either 100% of your earnings, or the AA limit, which is currently £60,000.

Different limits apply for high earners (the Tapered Annual Allowance) or anyone who has already taken money from a defined contribution (DC) pension pot, including BRASS or AVC Extra (the Money Purchase Annual Allowance).

You can find out more on the Tax limits page and the Read as you Need guide to annual allowance limits.

When the new tax year starts on 6 April, your AA will renew. So, if you can afford to, you might think about paying more into your pension now, to use up your remaining AA before the new tax year. See below for details on how to save more.

If you’ve already used your AA for this tax year, you can carry forward any unused AA from the previous 3 years. This may mean you can pay more into your pension, without having to pay any extra tax.

Saving more

You can save more into your RPS pension by making Additional Voluntary Contributions (AVCs). These are extra payments on top of your normal pension contributions to help boost your savings, and use up your AA.

You decide how much you want to pay in, starting from as little as £2 per week or £10 per month. These can be regular, or one-off, payments, and you can stop paying AVCs at any time.

You’ll also get tax relief on your AVCs, just like you do with your regular pension contributions.

You can also learn more about AVCs and how they could benefit you in this short video:

The main AVC arrangement for DB members is BRASS. You can find out more using the links below:

• page on BRASS for DB members 
• Read as you Need guide to BRASS
• separate guide for Network Rail members

If you’re already paying the maximum allowed into BRASS you may be able to pay into AVC Extra instead. You can find out more using the links below:

• page on AVC Extra for DB members
• Read as You Need guide to AVC Extra

If you’re an IWDC member in the RPS, any additional voluntary contributions you make, will go directly into your pot, known as your Personal Retirement Account (PRA). You can find out more in on the saving more page for IWDC members.

If you’re unsure whether to save more, or how it could benefit you, try thinking about how much you might need in retirement to fund the lifestyle you hope to have, and whether your current savings are enough. You can get tips on how to do that on the saving more page and by using the tools in your myRPS account. 

Tax when you take your benefits

Along with allowances while you’re saving, there are tax implications when you come to take your benefits too. This includes limits on the amount you can take as a tax-free lump sum (the Lump Sum Allowance) and the possibility of exceeding your Personal Allowance or going into a higher tax bracket if you take your benefits and continue to work.

You can find out more on the on the tax limits page and in the relevant planning for retirement section linked below:

• DB members - planning to take my pension 
• IWDC members - planning to take my IWDC pot