Do you find pensions confusing? It might be that no one has ever told you the basics. This article is designed to help you to understand how pensions work – to demystify a complex topic. It is general information – for specific information about your pension in the Scheme, please log in to PRISM using the login button at the top of the page.
The Trustees of the Barnardo Staff Pension Scheme (the Scheme) have put together these videos to help you to understand Defined Benefit pensions (like your pension in the Scheme), and the choices you have at retirement. We hope these videos are a helpful introduction. If you would like to discuss your benefits in more detail, please contact the administration team at Hymans Robertson.
In a DB pension scheme, the pension a member will get at retirement is worked out using a calculation, which is based on the member’s pensionable service in the scheme, their salary, and the rate at which they build up their pension each year.
For your pension in the Scheme, the rate at which you build up your pension, the definition of salary, and the other definitions used in the calculation are set out in the Scheme’s rules. There are different definitions depending on when you were an active member of the Scheme.
The trustees of a DB pension scheme ensure that the scheme will be able to pay the pensions due to scheme members by keeping an eye on the scheme’s assets and liabilities.
To find out more about your pension in the Scheme, please log in to PRISM using the login button at the top of the page.
If you have a pension in the Barnardo’s Retirement Savings Plan, this is a different type of pension scheme – called a Defined Contribution scheme. The Barnardo’s Retirement Savings Plan is a completely unrelated scheme, to find out more please visit the Plan’s website, workplace.aviva.co.uk/barnardos/
When you retire, you can take a full starting pension from the Scheme or normally, a reduced starting pension with a tax-free cash lump sum. The pension you receive will increase every year (subject to a cap set out in the Scheme’s rules), to help towards offsetting the impact of inflation.
Instead of taking your pension, you could instead choose to transfer your pension to a Defined Contribution scheme to access more options (though you would lose the security that a DB scheme provides).
You should think very carefully before doing this, and if the value of your pension is more than £30,000 then you will be required to take independent financial advice before you can transfer your pension out of the Scheme.
When you start your pension, in broad terms, you can normally exchange up to 25% of your starting pension for a tax-free cash lump sum and receive a lower starting pension.
The pension that you receive from the Scheme will be subject to income tax but not National Insurance contributions. The income tax you pay will depend on the total income you receive from the Scheme and from other sources, including employment and any State Pension. If the total of your taxable income is less than your Personal Allowance, you won’t pay any income tax. If it’s more, then you will have to pay tax.
To find out more about the Personal Allowance, visit: www.gov.uk/income-tax-rates
There are many useful websites designed to help you understand pensions, and you can find some of them in the ‘Useful links’ article under Help and further information. A good place to start is the government’s Money Helper website: moneyhelper.co.uk, which has information on pensions and on wider finances.
This article is for information only. It takes account of the Trustee’s understanding of the UK pensions and tax legislation in force as at August 2024 which are likely to change in the future. The Scheme is governed by the Trust Deed and Rules. In the event of any conflict between this note and the Scheme’s Trust Deed and Rules and/or overriding legislation, the latter will prevail.