If you’re thinking about ways to cut down on your costs, you’re not alone. Around 3 in 4 adults feel ‘very or somewhat worried’ about the rising costs of living. As a result, many of us are now spending less on non-essentials, according to research from the Office of National Statistics (ONS).

While contributing to your pension may not seem like a necessity now, it could make all the difference to your life after work.

Here’s how a freeze on your pension contributions today, could melt your retirement plans tomorrow.

You could lose the valuable benefits of your Fund pension

Your membership in the British Transport Police Force Superannuation Fund (BTPFSF) comes with many fantastic benefits. Freezing your contributions may put some, or all of these benefits at risk. 

• You’re not saving alone

  While you pay into your Fund pension, your employer pays in too. That means more money into your pension savings, at no cost to you.

  As a defined benefit (DB) member, your employer will pay in at least 60% of the value of your retirement benefits, which is usually 1.5 times your contribution.

  If you stop paying into your pension, your employer will normally stop paying in too. Even if you freeze or reduce your contributions for a year, you could miss out on a large sum of pension money when you retire.

• Your contributions are tax-free

  The government supports your pension saving journey with tax relief on your pension contributions. The money you pay into your pension is taken from your salary, before you pay tax on it. So, the money which would have been taken as tax goes towards your pension savings instead.

  For example, if you pay basic-rate tax (20%), and you want to save £100 into your pension, because of the way tax relief works it will only cost you £80. The other £20 comes from tax relief.

  You can learn more about how tax relief works here.

  You also benefit from tax relief on any Additional Voluntary Contributions (AVCs) you make. AVCs are extra contributions you pay into the Fund, on top of the contributions you and your employer pay in.

  The AVC arrangement for members of the 1970 section is called BRASS. You can find more information on BRASS here.

  For 2007 and CARE section members, the main AVC arrangement is AVC Extra. AVC Extra is also suitable for 1970 members, if they’re already paying maximum pension and BRASS contributions. You can learn more about AVC Extra here.

• Your pension is prepared for the unexpected

Life is full of twists and turns, and your Fund pension is here to support you through those times, too. If you die before you take your Fund pension, your loved ones might get a tax-free lump sum death benefit. Remember, if you stop contributing to the Fund while you’re still working, you will lose the Fund’s valuable death in service cover.

1970 and 2007 members can find more information on life changes and your Fund pension here.

CARE members can learn more about life changes and your Fund pension here.

As the saying goes, you never know what’s around the corner. If you need to stop working completely due to ill-health, you may be able to start taking your Fund pension and cash lump sum straight away, even before your Normal Retirement Age (NRA). This is known as an incapacity pension.

You can read more details in the Guide to applying for Incapacity Benefits here.

The less you pay in now, the less you’ll have later

You pay into your pension while you’re working, to give you a retirement income when you’re no longer working. It may seem obvious, but the less you pay in now, the less money you’ll have when you retire.

It’s great we’re living longer, but have you thought about what it might mean for your pension? According to the Office for National Statistics (ONS), the average life expectancy for a male born in the UK is 88 years, with a 1 in 4 chance of living to age 97.*

With potentially more years ahead of us, our pension savings may need to support a longer retirement. If you freeze your pension contributions now, it may mean you’ll need to continue working longer than you had hoped to, to pay for your life after work.

If you were to stop paying into the Fund for a few years but started paying in again at a later date, you may lose out on the Fund membership you would have built up in that time, if you had been paying in continuously. Remember, you will not be able to buy additional years’ Fund membership, which might mean you need to keep working longer to build up your membership again.

Your pension is an investment for your future

Are you familiar with the pension term, ‘compounding’? It’s how your pension savings grow as they’re invested.

The money you and your employer pay into your pension, plus any tax relief is invested by the scheme’s administrator, Railpen. Compounding is when your pension money grows as it’s invested, and then the growth on investments also grows over time.

A freeze on your contributions, even for a short time, could disturb the compounding that happens when you regularly pay into your pension. Plus, it could be hard to get back into the habit of paying into your pension. So, it’s a good idea to keep saving, if you can.

Compounding only directly impacts members who pay in Additional Voluntary Contributions (AVCs), such as BRASS or AVC Extra.

Your State Pension might not be enough

You’ve probably thought about what you’d like to do in retirement. Maybe some work on the house, take up a new hobby, or do some travelling. But all of those things come at a cost, and your State Pension alone might not be enough to cover them.  

The full new single-tier State Pension for 2023/24 is currently £203.85 per week. That’s around £10,000 a year. While the State Pension is set to increase, remember that life’s other costs, such as bills and holidays are likely to increase, too.

Plus, you may have to wait until your late 60s to claim your State Pension. The State Pension age (SPA) is currently 66 for both men and women, and will increase to age 67 in 2026-2028.

While the State Pension is a great place to start with saving for retirement, you might need to top it up with your Fund pension savings to enjoy the things you want to do in later life.

For a personalised estimate of how much you might need when you retire, try the Retirement Budgeting Calculator in your myFund account. The calculator lets you add your individual costs, to work out how much money you might need to pay for the retirement lifestyle you want.

Where to go for support

It’s important you think long and hard before freezing your pension contributions or making any changes to your pension savings.

If you pay in Additional Voluntary Contributions (AVCs), and you have no other option but to cut back on your spending, you could reduce the amount you pay in. Or, you could take a break from paying into AVCs for a short time. But it’s important that you keep paying into your main Fund benefits, if you can.

To weigh up your options, you could speak to your employer or talk to a financial adviser. You can find a list of specialist sites and professional advisers here.

If you’re looking for tips to manage your money, try the MoneyFit tool in your myFund account. MoneyFit gives you a personal action plan with advice to help you save into your pension in the future.   

Paying into your Fund pension is one of the most secure ways to plan for your future. If you think about your long term goals now, your future self will thank you later.

*Figures are correct as of March 2024, but may change. To check the latest figures, visit www.ons.gov.uk.