Here’s some of the key things you need to know about tax, and how it could benefit you and your pension. Please bear in mind that tax allowances are set by the government and are subject to change. You can get the latest updates at gov.uk. 

Tax relief

Saving with the Fund is tax efficient, because the money you pay in is taken from your salary before tax is deducted. That means you pay less tax on your salary and save more instead.

For example, if you’re a basic-rate tax payer (who pays 20% income tax) putting £100 into your pension, would only cost you £80, and the other £20 comes from tax relief. 

You can learn more by watching the short video about tax relief on the BTPFSF YouTube channel or in the video library.

The Annual Allowance

The Annual Allowance (AA) is a limit on the amount of your pension savings that can benefit from tax relief each year.

It means the most you can save tax-free in all your pension arrangements in a single tax year is the lower of either 100% of your earnings, or the AA limit, which is currently £60,000.

Different limits apply for high earners (this is called the Tapered Annual Allowance) or anyone who has already taken money from a defined contribution (DC) pension pot, including BRASS or AVC Extra (this is the Money Purchase Annual Allowance).

You can find out more in the Read as you Need guide to annual allowance limits or watch the short videos on tax in the video library.

When the new tax year starts on 6 April, your AA will renew. So, if you can afford to, you might think about paying more into your pension now, to use up your remaining AA before the new tax year. See below for details on how to save more.

If you’ve already used your AA for this tax year, you can carry forward any unused AA from the previous 3 years. This may mean you can pay more into your pension, without having to pay any extra tax.

Saving more

You can save more into your Fund pension by making Additional Voluntary Contributions (AVCs). These are extra payments on top of your normal pension contributions to help boost your savings, and use up your AA.

You decide how much you want to pay in, starting from as little as £2 per week or £10 per month. These can be regular, or one-off, payments, and you can stop paying AVCs at any time.

You’ll also get tax relief on your AVCs, just like you do with your regular pension contributions.

BRASS is the AVC arrangement for members of the 1970 section. You can find out more in the BRASS AVCs area of the website and in the Read as you Need guide for members of BRASS  

AVC Extra is the AVC arrangement for members of the 2007 and CARE sections, and for 1970 section members who are already paying the maximum into BRASS but still want to save more. You can find out more in the AVC Extra area of the website and in the Read as you Need guide for members with AVC Extra.

If you’re unsure whether to save more, or how it could benefit you, try thinking about how much you might need in retirement to fund the lifestyle you hope to have, and whether your current savings are enough. You can get tips on how to do that on the saving for retirement webpage and by using the tools in your myFund account.  

Tax when you take your benefits

Along with allowances while you’re saving, there are tax implications when you come to take your benefits too. This includes limits on the amount you can take as a tax-free lump sum (the Lump Sum Allowance) and the possibility of exceeding your Personal Allowance or going into a higher tax bracket if you take your benefits and continue to work.

You can find out more in the Read as you Need Guides on tax.