Blog

<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&nbsp;</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. &nbsp;</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.&nbsp;</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.&nbsp; </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.&nbsp;</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.&nbsp;</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>. &nbsp;</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>&nbsp;</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>

<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">In general, as a defined benefit (DB) member, the amount you pay in (contribute) depends on:</span></p><ul><li>The category of member you are </li><li>Your Pensionable Pay – this is your Pay at 1 April every year. This may be capped in some sections.</li><li>Your Section Pay – this is your Pensionable Pay minus 1.5 times the Basic State Pension. This may also be capped in some sections. </li><li>The contribution percentage rates for your Section, as set out in the Scheme rules. For some sections, Section Pay must be at least 50% or 55% of Pensionable Pay. </li></ul><p><strong>Please remember that rules vary between Sections and you should check your Member Guide for further details of what determines your contribution rate. </strong></p><p><strong>Contribution rates can also change for a number of reasons, for example as a result of the Actuarial Valuation, which is carried out every 3 years. You can find more details on why contributions change below. &nbsp;</strong><br></p><p>What sets a workplace pension apart from a personal pension and other savings options is that your employer normally contributes as well. How much your employer pays into the RPS depends on the same factors as your contribution amount outlined above.<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">&nbsp;</span></p><p>For example: </p><p><img src="https://cdn3.railpen.com/mp-sitefinity-prod/images/default-source/infographics-(current)/db-contributions-table.png?sfvrsn=da463ccc_1" alt="An example of DB contribution rates and what they are based on"></p><p><strong style="background-color: rgba(0, 0, 0, 0); color: inherit; font-size: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit"></strong><strong style="background-color: rgba(0, 0, 0, 0); color: inherit; font-size: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit">You can find out what percentage you pay into the Scheme in your Member Guide. This is available in the 'My Library' area when you log into <a href="/login">your myRPS account</a>.</strong><br></p><p>You may also be able see your pension contributions on your payslip. <br></p><h4>How your contributions are paid:<strong> </strong><br></h4><p>Your pension contributions are taken from your gross pay, so they are not subject to Income Tax. This means you are getting tax relief on your contributions (up to certain limits) so that some of the money that would normally have gone to the government in tax, effectively goes towards your pension instead<br></p><p>Many employers also operate a salary sacrifice scheme for pension contributions, also known as SMART. It means that: <br></p><ul type="disc"><li>your employer pays your pension contributions on your behalf​</li><li>your contractual pay is adjusted to reflect this change ​</li><li>you and your employer pay National Insurance on a lower salary<br></li></ul><p>If you’re unsure whether you pay your pension contributions via salary sacrifice please check with your employer. <br></p><p>You can also find more information in your Member Guide. <br></p><h4>When your contributions change<br></h4><p>The % rate of contributions can go up or down, to meet the cost of paying current and future benefits from the Section. <br></p><p>Generally, the rate is reviewed every 3 years and agreed between the Trustee, the employer and an external adviser known as the Scheme Actuary. <br></p><p>The contributions you pay are then fixed from July each year,&nbsp;using your Pensionable Pay at 1 April​<br></p><p>They may change at other times, for example as a result of:​<br></p><ul type="disc"><li>a change in personal circumstances, such as taking statutory maternity, paternity or adoption leave</li><li>a change in working hours e.g. moving to part-time hours<br></li></ul><p>You can read more about this on the <a href="/defined-benefit-members/im-still-working/changes-to-circumstances">change in circumstances page</a> and in your Member Guide. <br></p><h4>Ways of saving more<br></h4><p>You can choose to pay in more to ‘top-up’ your main pension savings if you wish. This is known as making Additional Voluntary Contributions (AVCs). <br></p><p>These are held separately from your main Scheme benefits and are invested in a fund, or range of funds, with the aim of growing your AVC pot over time. <br></p><p>Like your main Scheme contributions outlined above, AVCs are usually taken from your pay before tax, so you benefit from tax relief there too. <br></p><p>The main AVC arrangement in the RPS is called BRASS, which you can incorporate with your main Scheme benefits when you take them.&nbsp; If you reach the limit you can pay into BRASS, you may be able to apply for another arrangement, called AVC Extra.&nbsp;<br></p><p>You can find out more about both options in the <a href="/defined-benefit-members/saving-more-BRASS-AVC-Extra">saving more area</a> of the website. <br></p><p>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. Visit the<a href="/pension-essentials/pension-tax-limits"> </a><a href="https://member.railwayspensions.co.uk/pension-essentials/pension-tax-limits" data-sf-ec-immutable="">pension tax limits page</a> to find out more.&nbsp;</p>

<p>In general, as a member of the Industry-Wide Defined Contribution (IWDC) Section, the amount you and your employer pay in (contribute) depends on:</p><ul><li>Your Pensionable Pay </li><li>The contribution percentage rates set by your employer &nbsp;</li></ul><p>For example:</p><p><img alt="An example of IWDC contribution rates and what they are based on" src="https://cdn3.railpen.com/mp-sitefinity-prod/images/default-source/infographics-(current)/dc-contributions-table.png?sfvrsn=42fe4991_1"></p><div><div><div id="_com_1"><p><strong>You can find more information, including the definition of Pensionable Pay and your current contribution percentage rates, in your Key Features leaflet and Member Guide. </strong><strong>These are available in the 'My Library' area when you log into <a href="/login">your myRPS account</a>. </strong><br></p><p>You can also check with your employer to understand which part of your annual salary counts towards your Pensionable Pay and what your set contribution rates are. <br></p><p>You may be able to see your pension contribution amount on your payslips. <br></p><h4><strong>How your contributions are paid in: </strong><br></h4><p>Your pension contributions are taken from your gross pay, which is your pay before any income tax is taken from you.</p><p>You get tax relief on your contributions (up to certain limits), so this means that some of the money that would normally have gone to the government in tax, effectively goes towards your pension instead. <br></p><p>Many employers also operate a salary sacrifice arrangement for pension contributions, also known as SMART. Under this your National Insurance contributions go down, but your normal pension contributions don’t change. It means that:<br></p><ul type="disc"><li>your employer pays your pension contributions on your behalf​</li><li>your contractual pay is adjusted to reflect this change</li><li>you and your employer pay National Insurance contributions on a lower salary​&nbsp;</li><li>your take-home pay goes up, because you are paying lower National Insurance contributions<br></li></ul><p>If you’re unsure whether you pay your pension contributions via salary sacrifice, please check with your employer. </p><h4><strong>When your contributions change</strong></h4><p>The amounts that you and your employer pay in will change if your Pensionable Pay changes.&nbsp; They may also change at other times, for example as a result of:​<br></p><ul type="disc"><li>a change in personal circumstances, such as taking statutory maternity, paternity or adoption leave</li><li>a change in working hours e.g. moving to part-time hours<br></li></ul><p>You can read more about this on the <a href="/iwdc-members/Im-still-working/changes-to-circumstances">‘change in circumstances’ page</a>&nbsp;and in your Member Guide. <br></p><p>Your employer may also change the contribution percentage rates in the future, but they would consult with you first. <br></p><h4><strong>What happens to your contributions</strong><br></h4><p>The money you and your employer&nbsp;pay into your pension pot is invested in a range of funds, with the aim of helping it grow over time. <br></p><p>The value of your pot when you decide to take it largely depends on:</p><ul type="square"><li>how much you and your employer have paid in. <a href="/iwdc-members/Im-still-working/my-payments"><strong>Visit the my payments page for details.</strong></a>&nbsp;</li><li>how long you have saved for</li><li>how well your chosen investment funds have performed (unless you have chosen a Lifestyle strategy) after any costs have been deducted. <a href="/iwdc-members/managing-investments/investing--the-basics-i-need-to-know"><strong>Visit the investing: the basics I need to know page for details.</strong></a></li><li><span style="background-color: rgba(0, 0, 0, 0); color: inherit; font-family: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit; font-size: inherit">any fees or deductions, </span> <a style="font-family: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; white-space: inherit; font-size: inherit" href="/iwdc-members/managing-investments/fund-choices"><strong>You can find details of any fees or charges that may be applied within the factsheets on the my fund choices page</strong></a><span style="background-color: rgba(0, 0, 0, 0); color: inherit; font-family: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit; font-size: inherit"></span></li></ul><p>That’s why it’s so important for you to fully understand your options and how saving in a Defined Contributions (DC) scheme works. <br></p><h4><strong>Ways of saving more</strong><br></h4><p>You can choose to pay in more to ‘top-up’ your pension pot if you wish. <a href="/iwdc-members/Im-still-working/saving-more">This is known as making Additional Voluntary Contributions (AVCs)</a>. <br></p><p>You can decide to make AVCs regularly, or as one-off payments, and it’s entirely up to you how much you want to contribute and where you want to invest them. Like your main IWDC pension contributions, AVCs are usually taken from your pay before any income tax, so you benefit from tax relief there too (up to certain limits). <br></p><p>AVCs are a great way to save particularly if you:<br></p><ul><li>have earnings, such as bonuses or overtime if they are not part of your Pensionable Pay</li><li>are thinking about taking your pension pot early</li><li>simply want to save a bit more towards your life after work<br></li></ul><p>If you are interested in paying AVCs please speak to your employer who will start the process for you.</p></div></div></div>