Your contributions and pension benefits
Find out more about the payments you make towards your Magnox Group of the Electricity Supply Pension Scheme (Magnox ESPS) pension, and the wide range of benefits it offers you. Select the specific topics from the list below to read more.
Your pension payments (contributions)
As a member of the Final Salary Section of the Magnox ESPS, you pay regular payments into your pension. These are known as contributions and are taken directly from your salary.
You contribute 6% of your pensionable salary towards you pension.
If you joined the industry before 1 April 1988, and have a Normal Pension Age of 60, your contributions will stop from age 60 but you will continue to build up your benefits as normal.
For more details please refer to your member booklet.
Remember, it's not just you who pays into your Scheme pension, your employer also pays in and shares the cost with you.
Your contributions also qualify for tax relief, which is given automatically through the PAYE payroll system.
For more information about how contributions are invested, please refer to your latest Pensions Update newsletter or the Scheme Report and Accounts.
Boosting your contributions
You can choose to pay in more to boost your main pension savings. This is known as making Additional Voluntary Contributions (AVCs). It’s a tax-efficient way to pay extra and save more towards your pension.
You can find more information on the AVCs page and by selecting "your pension benefits while your working" from the content list above.
Keep in mind that there is a limit on the the total amount you can pay into all of your pension arrangements each tax year before tax will be charged. This is known as the Annual Allowance (AA).
If you exceed this amount and are liable for an Annual Allowance (AA) tax charge of £2,000 or more, you can elect for the Magnox Group to pay some, or all, of the charge on your behalf, rather than you pay it directly. This is known as Scheme Pays.
When you retire, the total amount due, will be deducted from your benefits. How this is done depends on whether or not you have an AVC pot.
You are responsible for letting HMRC know if you exceed the Annual Allowance limit . This can usually be done via self-assessment.
If you are interested in using Scheme Pays to pay an AA charge, please contact the Scheme administrator, Railpen.
The Annual Allowance (AA)
Reducing your payments
There may be times in life when payments to your pension need to change.
You cannot decide to change the amount you pay from your salary, as this is set by the rules of the Scheme.
However there are times when the amount taken may change automatically, for example, during family leave or a career break. You can find out more about this on the if your circumstances change page and in your member booklet.
If you are thinking about stopping your pension contributions completely, ie leaving the scheme, then there are various rules that will apply.
Both the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR) believe that it will be in most people’s best interests not to leave their defined benefit pension. So, please think carefully before you make a decision.
You can find out more on the leaving the Scheme page and in your member booklet.
Your pension benefits while you're working
A great way to plan for your future is to make the most of your Scheme membership now.
Making the most of it while you’re still working, could put you in a better position once you retire. It’s important to understand what you’re entitled to, and the options available to aid your pension saving journey with the Scheme.
Some of the benefits include:
Your employer pays in too
While you’re paying into your pension, your employer is paying in too. That means more savings into your pension at no cost to you. You also benefit from tax relief on your contributions. You can read more about tax relief on the tax on your pension page.
Death benefits mean you’re looking out for your loved ones
If you die before taking your pension your loved ones might get a tax-free lump sum. You can tell the Trustee who you would like to get this by making a nomination when you log in to your myESPS account. Your dependants - such as your family - may also get a pension. For more information, please check your member booklet.
You can save even more
You have the option to ‘top-up’ your main pension savings by paying Additional Voluntary Contributions (AVCs). It’s a tax-efficient way to pay extra and save more for the future.
You can find out more about AVCs and how they work on the AVCs page.
AVCs can be particularly helpful if you:
- have extra earnings such as bonuses or overtime
- are thinking about taking your benefits early (subject to eligibility), or
- want to save a bit more towards your future
Your pension benefits when you retire
Being a member of a Final Salary Section of the Magnox ESPS means you get a range of valuable benefits, both while you’re working and once you’ve retired.
When you retire as a Final Salary Section member...
You will get a pension for life when you retire
You have options on how to receive your pension, for example you can:
- exchange part of your pension benefits to provide additional pension for a spouse or another dependent when you die
- exchange/convert part of your pension for an additional lump sum. This would be in addition to the standard pension lump sum (see below) and would be subject to the Lump Sum Allowance (LSA)
- exchange/convert all, or part, of your standard lump sum, for additional pension - this option is available on request from Railpen
It’s important that you understand the benefits and limitations of each of these options before making a decision. Find out more on the taking your benefits page.
If you’ve been paying Additional Voluntary Contributions (AVCs) you can use the money in that pension pot to boost your pension even further. Find out more on the AVCs page.
You will get a tax-free lump sum
You may be able take up to 25% (but no more than £268,275) of your pension benefits as a tax-free cash lump sum.
You may be able to receive more of a tax-free lump sum if you have applied to and received either enhanced or primary protection from HM Revenue & Customs (HMRC) with lump sum protection. Different terms and conditions apply to each of these protections. Your certificate will contain details of any lump sum protection.
If you have fixed or individual protection relating to the Lifetime Allowance (LTA), the amount of tax-free lump sum you can take is normally limited to 25% of the value of your protection.
Tax is taken from your pension payment before you receive it, based on a tax code supplied by HMRC.
Your dependants could be entitled to death benefits
This may include:
- lump sum – this will depend on how long you’ve been taking your pension and whether you took a lump sum previously
- a pension – this could be for a spouse, children or other dependant
You can find out more on the nominations and death benefits page.
The impact of Scheme Pays on your benefits
If you are liable for an Annual Allowance (AA) tax charge of £2,000 or more, you can elect for the Magnox Group to pay some, or all, of the charge on your behalf, rather than you paying it directly. This is known as Scheme Pays.
In this instance, we record the amount of AA charge paid as a notional negative amount and arrange for this to be paid on your behalf.
We then charge you interest on the amount of tax paid each April. This is done up until the time you retire/transfer, at an interest rate set by the Scheme Actuary.
When you retire, the total amount due will be deducted from your benefits. How this is done depends on whether or not you have an AVC pot, as explained below.
The Annual Allowance (AA)
- If you have an AVC pot
If you have an AVC pot and you opt for the Scheme to pay some or all of your AA charge, then it will be taken from your AVC pot at the time it is paid to you.
- If you do not have an AVC pot
If do not have an AVC pot and you opt for the Scheme to pay some or all of your AA charge, then the benefits that you get when you retire/transfer will be reduced in order for the Scheme to recover the tax paid on your behalf.
If your pension savings in the Magnox Pension Scheme are greater than either the AA or the Money Purchase Annual Allowance (MPAA), then we will send you a Pension Savings Statement (PSS) that will detail the benefits savings for the relevant period.
Your Annual Benefit Statement (ABS) will also give you an indication of how much of the AA you have used in respect of your savings in the Scheme. However, you will need to factor in the amount of savings you have built up in any other pension schemes that you are a member of separately.
Please keep in mind that you are responsible for letting HMRC know if you exceed the Annual Allowance . This can usually be done via self-assessment.
If you are interested in using Scheme Pays to pay an AA charge, please contact the Scheme administrator, Railpen.
