February 2017 issue 68 Join us online! More than 4,000 RPS members have registered online for myrps have you? MyRPS is a secure area of your railways pensions website, where you can find your own personal pension information. You access it on a computer, smartphone or tablet, so it s easy to keep track of your pension whenever, wherever. 5 You can: n 1 n 2 n n 4 n 5 reasons to register check your latest Annual Pension Estimate complete your nominations use tools to help you plan for retirement find information about your BRASS funds read your Member Guide Get started Visit Railwayspensions.co.uk/register. You ll need your: n email address n National Insurance number n pension reference number (you ll find this on the message enclosed with your newsletter) inside this issue: Brexit update Choosing an independent financial adviser Questions about early retirement Risk-taker or cautious saver Valuation latest
page 02 Trustee s message... Brexit it s the topic on everyone s lips at the moment. Change can be unsettling and, understandably, some people are anxious about how the future will look once the United Kingdom leaves the European Union. Very little is known for certain so far, but we should have more information in the coming months while negotiations progress. One thing I can assure you of is that the Trustee Board and I will continue to work to protect the best interests of both you and the Scheme as a whole. As you can see to the right, the Scheme is in robust health at the moment and we intend to keep it that way! We ll continue to update you on any matters that affect your pension not only in Review, but also on your website, Railwayspensions.co.uk. Best wishes, At a glance At the end of 2016, the Railways Pension Scheme had: 110 sections 685m contributions paid in 1,00m benefits paid out John Chilman Trustee Chairman 25.5bn assets Figures as at 1 January 2017
page 0 What are death benefits? If you die while you re still paying into the RPS, your loved ones may receive benefits from the Scheme. These are often referred to as death benefits. Death benefits vary between Sections, but the Scheme will normally pay: n A lump sum n A dependant s pension, and n Children s pensions Your dependant would usually be the person you were married to, or in a civil partnership with, and living with at the date of your death. Don t leave it too late! You never know what s around the corner, so make sure the Trustee knows who you d like the lump sum to go to if you die. The easiest way to tell the Trustee what you want is to nominate online. It only takes a couple of minutes: 1. Sign into your myrps account at Railwayspensions.co.uk (or register if you don t yet have an account). 2. Go to My nominations.. Enter details for your chosen beneficiaries. 4. Say what percentage of your lump sum you d like them to receive. 5. Check you re happy and submit. Once you ve nominated online, you ll be able to see a record of your wishes whenever you log into myrps, so keeping track and making changes is easy! Thousands of members have already nominated online. Do yours now! Did you know..? Your RPS death benefit lump sum is worth 4 times your final salary! 4x your annual salary Be scam-savvy! Thousands of people have lost their entire savings after falling for a pension scam don t be one of them! The best way to protect your pension is to know the warning signs. These can include overseas investment deals, cashing in your pension early, or cold calls offering a pension review. Visit Railwayspensions.co.uk/ scams for more advice on how to spot a scam and what to do if you re affected by one. www.railwayspensions.co.uk Helpline telephone number: 0800 2 444 csu@rpmi.co.uk
page 04 Pension news in brief: This feature looks at developments in pensions which may affect you as an active member of the RPS. Brexit update The outcome of the European Union (EU) referendum on 2 June 2016 has dominated the news in recent months. As many of the laws governing pension schemes are influenced or dictated by EU laws, there may be an impact on pension schemes such as the RPS. The government plans to trigger Article 50 by the end of March 2017, meaning that the UK would withdraw from the EU by the end of March 2019. However, the terms of withdrawal from the EU are unknown, so it is too early to fully assess the impact on UK pensions. The situation should become clearer over the coming months and years. In the short term, the UK remains a member of the EU and pension laws will remain in place, whether they are based on EU legislation or not. In the longer term, once the UK exits from the EU, the UK government may have the freedom to gradually amend legislation which has been influenced by Europe. However, a significant amount of EU pensionrelated legislation is also written into UK law so there would need to be a good reason to amend it as changes would cost time and money. Therefore, once the UK has withdrawn from the EU, there may not be any immediate or significant reduction in legal requirements for UK pension schemes. So, for now, we do not expect the result of the EU referendum to impact your RPS benefits, but we will keep you informed in future editions of Review, and online at Railwayspensions.co.uk as Brexit progresses. Autumn Statement This year s Autumn Statement took place on 2 November 2016 and was the first since the EU referendum. It was relatively light on developments about pensions, although the following two items were announced: n As part of a clampdown on pension scams, a consultation is being held about plans to introduce a ban on cold calling and powers to block transfers to suspicious arrangements. n The government plans to reduce the money purchase annual allowance (MPAA) from 10,000 to 4,000, from April 2017. The MPAA
page 05 The government plans to maintain the State Pension triple-lock for now, but there is pressure for it to be changed in future. Jargon buster What is an active member? Active members of the Scheme are those like you who are currently paying into it. If you leave the RPS (for instance, if you change employers or decide you no longer want to be a member), you ll no longer be active. was introduced in April 2015 and would apply to you if you have already accessed any benefits using the new pension freedoms (such as accessing some pension benefits in the form of flexible drawdown or as a cash lump sum). The MPAA then acts as a cap on the amount you can contribute each year to money purchase arrangements, such as BRASS, with tax relief. The government also announced that it plans to maintain the State Pension triple-lock for now, but there is pressure for it to be changed in future. Work and Pensions Committee review of pensions Following the collapse of BHS, Parliament s Work and Pensions Committee launched an inquiry into the operation of pensions law and regulation governing defined benefit pension schemes. This inquiry is ongoing and may help to shape laws relating to defined benefit pension schemes, such as the RPS. If you do not take your benefits when you leave active service, you become a preserved (or deferred ) member. This means the money you and your employer have paid in is kept in the Scheme on your behalf until you re ready to claim it when you retire. Need answers? If you have a question about your RPS pension, you might find the answer you re looking for in our online FAQ section. The website also has useful guides to help you understand different pension topics, and forms to help you manage your membership. We will monitor developments in this area and report on any significant news in future editions of Review. www.railwayspensions.co.uk Helpline telephone number: 0800 2 444 csu@rpmi.co.uk
page 06 Lifetime Allowance: 2016 protections HM Revenue & Customs (HMRC) is offering two protections to pension scheme members who may be affected by the changes to the Lifetime Allowance made in 2016. The Lifetime Allowance is a limit on the pension savings you can make over your lifetime with tax relief. It reduced from 1.25 million to 1 million on 6 April 2016. Individual Protection 2016 Provides a bespoke level of Lifetime Allowance to those people who already had pension savings with a value of more than 1 million on 5 April 2016. 1.25m 1m Before 6 April 2016 On and after 6 April 2016 Those affected by the change are able to apply for one of two protections Fixed Protection 2016 Allows the previous Lifetime Allowance of 1.25 million to be retained, but no further benefits can be built up after 5 April 2016, so this is no longer an option for active RPS members. Applications for these protections can now be made online. You can read more and find out how to apply at Gov.uk/tax-on-your-private-pension/lifetime-allowance. Choosing an IFA It s a good idea to seek guidance from an Independent Financial Adviser (IFA) before making decisions about your finances and which options or products will suit you best. Things to consider when choosing an IFA: Check the Financial Conduct Authority s (FCA) Register at Fca.org.uk/firms/financialservices-register to make sure the adviser is authorised to provide financial advice. Find out what services they offer and what they charge for these. Some advisers will offer free initial consultations. Decide whether you want advice about your retirement savings only or for all of your financial planning, then check how much experience the adviser has in those areas. Try to read feedback from other clients see if their needs were similar to yours and how they felt about the experience. Check if the adviser recommends products from the whole market or if they re tied to a small number of providers. Visit the FCA s website at Fca.org.uk to get more advice, or find IFAs in your local area at Fca.org.uk/consumers/ finding-adviser or Unbiased.co.uk.
page 07 State Pension age review The State Pension age is currently under review and any recommendations will be announced by May 2017. An interim report and consultation was published in the autumn. This looked at aspects of the current system, and alternatives to a universal age, which reflects the differing life expectancies among different sections of the population. The aim of the review is to ensure the State Pension system is affordable and fair, as well as supporting fuller working lives by giving people the chance to work longer. Any proposed changes are not expected to apply before 2028, by which time the State Pension age will be 67. This means that any changes are unlikely to affect anyone born in the early 1960s or before. Please note that any change to the State Pension age would only affect when you take your state benefits and will not affect when you can take your RPS benefits. You can check your current State Pension age at Gov.uk/state-pension-age. You can also get a forecast of your State Pension at Gov.uk/state-pension-statement. Sign in using your Government Gateway account (or set up an account if you don t have one). Within the State Pension forecast you can see: n information about your National Insurance record to date; n how much State Pension your National Insurance contributions have already built up; and n what State Pension you might expect to get when you reach State Pension age. Moving house? If you change your address or contact information at any time, please remember to give your new details to your employer, who will then update your record with the Scheme s administrator, RPMI. www.railwayspensions.co.uk Helpline telephone number: 0800 2 444 csu@rpmi.co.uk
page 08 Your questions about early retirement How early can I take my RPS benefits? Sections of the RPS have a normal retirement age which is between 60 and 65. However, you can retire from age 55 if you want to. And if you were an active member of the RPS on 5 April 2006, you may be able to retire as early as age 50. If I decide to retire early, will my pension be reduced? Yes. The benefits you ll get from the RPS will be reduced the further you are from your normal retirement age, the bigger the reduction will be. You can find the early retirement reductions that apply to your Section by visiting Railwayspensions.co.uk. Log into your myrps account and look under My Library. Active member of RPS on 5 April 2006 Early retirement Can retire if you want to Normal retirement age 50 55 60 65 Retirement age Normal retirement age Why is my pension reduced if I retire early? If you retire early, your pension is likely to be paid for longer than if you d retired at your normal retirement age and you may have paid in less than anticipated The reduction helps to address those unexpected costs to make sure your Section remains affordable for those who will retire in years to come. What should I do if I m thinking of taking early retirement? It s wise to budget for your retirement and work out the outgoings you expect to pay and the income you ll need to afford them. You may wish to speak to an independent financial adviser (IFA) before making any decisions (see page 6). If you decide you want to apply for early retirement, please contact the Helpline by emailing csu@rpmi.co.uk or calling 0800 2 444. Early retirement Income Normal retirement age Member Outgoings PLEASE NOTE: Diagrams are for illustrative purposes only and do not represent actual values.
page 09 Be prepared! Millions of people are under-saving for their retirement are you one of them? According to research from Royal London*, people retiring in 2050 are likely to need a pension pot of around 666,000 to maintain the same standard of living as today s pensioners but the average sum saved by 0-40 year olds was just 14,000. Only 15% of 18-40 year olds felt they had saved enough for retirement and 28% of 0-40 year olds had never reviewed how much they contribute into their pension. So, what do you want when you retire? How much will it cost you? Are you saving enough? If you don t know the answer, don t leave it too late to plan. Reality could fall disappointingly short of your expectations if you do! We ve done the hard work for you Use the lifestyle calculator at Railwayspensions.co.uk to get an estimate of the living costs you could face when you retire. You can then compare this to your estimated pension from the RPS, which is shown in your Annual Pension Estimate. Log into your myrps account (or register) at Railwayspensions.co.uk and look under Planning my future to get started. *September 2015, Royal London, Pensions Through the Ages. Need to top up your savings? If you d like to save more for your retirement, you could pay into an Additional Voluntary Contribution (AVC) arrangement, such as BRASS. With BRASS, you decide how much you pay, and when to start and stop. And the money you pay in is tax-free (subject to limits), just like your contributions to the Scheme. You can find more information at Railwayspensions.co.uk/ BRASS and on pages 10 and 11. www.railwayspensions.co.uk Helpline telephone number: 0800 2 444 csu@rpmi.co.uk
Risk taker or... cautious saver? page 10 Before you decide how to invest your Additional Voluntary Contributions (AVCs), you need to consider how you feel about investment risk. If you join BRASS or AVC Extra*, you ll be asked which fund(s) you want to invest in. Usually, the more you pay into your pension and the more your investments grow the better off you ll be in retirement, so your fund choices could have a big impact on your future pension benefits. Unless you choose otherwise, you ll automatically be invested in the default fund, known as a Lifestyle strategy, and your investments will be switched on your behalf following a pre-set strategy (read more in Your Target Retirement Age opposite). But, if you re comfortable managing your own investments, you can instead choose one or more funds from the self-select range. Each of the self-select funds has been given a risk rating between 1 and 7. One is low risk, 7 is high. So, what s right for you? Are you willing to take a greater risk knowing the rewards could be bigger, or would you prefer a safer bet and smaller reward? Of course, it depends on your needs and circumstances. For instance, if you re a long way from taking your benefits, you might be able to take more risk and try to grow your fund, knowing you have time to take action if any big drops in the market affected you. On the other hand, if you re close to taking your benefits, you might want to consider protecting the value of your savings by taking less risk. Once you understand your attitude to risk, you can think about your aims for your retirement and start choosing. You can review your funds at any time (and switch them if you need to) by visiting Railwayspensions.co.uk and logging in to your myrps account. More information on fund choices can be found at Railwayspensions.co.uk/BRASS-fund-choices or Railwayspensions.co.uk/AVC-Extra-fund-choices. You should consider speaking to an independent financial adviser (IFA) before making decisions about your finances. Visit Unbiased.co.uk to find IFAs in your area. *AVC Extra is not applicable to members of the Network Rail Section. Remember... Low-risk funds are steadier, but they re less likely to help your benefits grow over the longer term. High-risk funds should expect to see above average growth over the long term; but they might see big falls in value in the short term. Low risk High risk
page 11 Your Target Retirement Age If you decide to invest in a Lifestyle strategy for BRASS or AVC Extra, your Target Retirement Age (TRA) for those accounts will be age 60, unless you choose otherwise. In a Lifestyle strategy, your investments start moving from high-risk funds, which have the potential for higher growth, to more stable, low-risk funds to protect your fund s value as you draw closer to your TRA. It s therefore important that your TRA is up to date, particularly if you re within 5-10 years of retirement. www.railwayspensions.co.uk Retirement plans change over time, so you should regularly check that your TRA is still in line with when you want to take your benefits. You can update it at any time if not. Your TRA for BRASS and AVC Extra is separate to your normal retirement age for claiming your RPS pension benefits. You cannot change your normal retirement age, as this is defined in the rules of your Section, but you can change your TRA if this is different and you want the two to match. If you want to check or change your TRA at any time, call the Helpline on 0800 2 444. Helpline telephone number: 0800 2 444 csu@rpmi.co.uk
page 12 Latest on the 2016 valuation The RPS valuation is underway, and will calculate the position of sections of the Scheme on 1 December 2016. The valuation is essentially a health-check which takes place every three years to assess the funding level of each section. This is to check whether there will be enough funds to pay the pension benefits that members have already built up, as well as those that are expected in future. The results of the valuation and any actions arising from it must be agreed between the Trustee, the employer, and the Pensions Committee (where applicable). What s happened so far The Trustee and Scheme Actuary are consulting with employers and Pensions Committees to agree the methodology and assumptions that will be used in the valuation. These assumptions cover economic and demographic factors, such as future inflation, salary growth, pension increases, investment returns, and mortality, early retirement and ill-health rates. The employer or Pensions Committee for your Section will receive indicative results of the valuation by the end of March and the full draft results will be published in June. The good stuff! There are lots of benefits to being a member of the RPS and getting a pension for life when you retire is just one of them. You also get: Tax relief on the money you pay in Contributions from your employer The ability to pay more through Additional Voluntary Contributions (AVCs) The option to retire from age 55 (or earlier in some circumstances) A lump sum paid to the people or organisations that matter to you if you die before you claim your RPS benefits Pensions for your spouse or civil partner and/or dependants if you die before you claim your RPS benefits The option of a tax-free lump sum when you take your pension Get in touch Pension queries Contact the Helpline: Telephone: 0800 2 444 (Mon-Fri, 8am-5pm) Email: csu@rpmi.co.uk Overseas calls: Survey +44 125 42 800 (charged at normal overseas call rates) Please complete our short survey at Surveymonkey.co.uk/r/ ReviewFeb17 or scan the QR code on your smartphone.