Moving from defined benefit Teacher's pension to defined benefit Railway Pension scheme

happygolucky85

Hi all, I am looking for some advice on my work pension. I moved from working as a teacher to the railways around 9 months ago. I am trying to decide whether I should transfer my pension benefits from teaching into my railway pension, or whether to leave it as a separate entity. Pensions confuse me, so if anyone had any advice or knowledge about this, I would be very grateful!

Marcon

Just checking: are you in a section of the RPS which accepts transfers in? Not all sections do.

JoeCrystal

It would be your worthwhile to do research on what your TPS can buy in the section of RPS and compare quotes and benefits (You know, rather than getting confused by pensions, read up about it! ). No point asking us since every section of RPS is different so you need to do a proper research. South Western Railway section of the Railways Pension Scheme for example are generous in that the NRA is 62 for new joiners, and it is still based on the Final Salary. Peanuts considering how low the contribution rate for their employees are. Of course, your biggest advantage would be to use  transferred-in benefits to avoid 2 years service requirement so something to bear in mind if you decided railways is not for you.

daveyjp

You also need to understand how the creation of Great British Railways may impact pension provision of railway employees.

JoeCrystal

daveyjp said:

You also need to understand how the creation of Great British Railways may impact pension provision of railway employees.

Indeed, considering it is extremely difficult for the employers since British Rail went privatised to reduce the cost to RPS which is why so many sections still retains hangover. I remember reading that all railway employers are desperate to lower the pension cost but legal and industrial relations environment makes it difficult to execute those changes, unfortunately. Hopefully the Great British Railways would be able to merge all these sections and force the same CARE rules for all new services going forward and hopefully at much cheaper cost to the taxpayers eventually. Arguably, the RPS is likely the last of the real public sector final salary pension schemes in the country.

EDIT: After quite an interesting clarifying post by ewaste below, it actually may not be that generous after all so I will take back the comment above!

Brie

All else aside (like whether a transfer is actually possible) you might want to consider the positives of keeping them separate.  You can then start one while you are still paying in to the other.  Or take a tax free lump from one but not the other.  

ewaste

The Railways Pension scheme is far from being a Final Salary Scheme, it's important to look at the small print. The scheme has long since introduced a Pensionable Pay Cap and Pensionable Restructuring Premiums (PRP). The Basic State Pension Deduction also means by and large it's been a pretty poor scheme for the majority of active members. 

If someone receives a Pay Rise due to a promotion it's often pensionable for future service only. Alternatively if it doesn't trigger a PRP it will certainly be capped by the pensionable pay cap and therefore never become pensionable. 

Benefits are calculated on Section Pay which is the Capped Pensionable Pay minus 1.5x the Annual Basic State Pension. Given the BSP is Triple Locked section pay has been falling for the majority of members for a number of years. 

The scheme is run on a shared cost basis split 40% Employee and 60% Employer. As an example the employer contribution rate for an Ex-BR protected member of the Network Rail Section RPS60 is currently 12.12% the Employee pays 8.08%. For Non-Protected it's Employee 8.76% and Employer 9.74%, thats a lower Employer contribution rate than many of the better DC schemes out there.

There are some CARE Sections of the RPS and Network Rail I believe operate an entirely separate CARE Scheme as well. They've probably worked out as a better option nevermind how good the TPS is in comparison with it's accrual rate and active member revaluation rate.