How does my pension work? – DB Section
Your TotalEnergies pension makes up an important part of your retirement income.
If you have been a member of any of our Defined Benefit (DB) sections of the Plan, your pension will be built up as annual pension, that is payable for life. You will also have the option to choose how you wish take to this at retirement.
Defined Benefit (DB) Section
TotalEnergies as a Company has traditionally provided members with what is known as a Defined Benefit (DB) pension benefit via the Plan.
This is sometimes referred to as a ‘Final Salary’ pension. This broadly means that the pension you receive at retirement will be based on your salary and the number of years you’ve worked for a participating employer in the Plan, rather than the amount you’ve paid into the Plan.
The DB sections of the Plan were closed to new joiners, between 2002 - 2007 and then all sections closed to future accrual on 31st December 2021.
The Annual Allowance (AA) is the amount of pension benefits you can build up in a single tax year without a tax charge applying and while still benefitting from tax relief.
As of 6 April 2023, the standard AA is £60,000 per year (but see below for exceptions). For the DB sections of the Plan, it's based on the capital value of the increase in your pension benefits over the tax year.
It’s possible to save more than the standard £60,000 by carrying forward any unused AA from the three previous tax years.
Also, there are currently two situations where your AA may be lower than £60,000
- If you have a high income totalling over £240,000 per year (from 2020/21). This threshold income is different for earlier tax years.
- If you have accessed some of your pension savings from a Defined Contribution (DC) arrangement.
You can find out more about AA and what it potentially means for you on the Gov.uk website: https://www.gov.uk/tax-on-your-private-pension/annual-allowance
Lifetime Allowance (LTA)
The Lifetime Allowance (LTA) is the amount of pension benefits you can build up over your lifetime, whilst still enjoying the full tax benefits.
The Lifetime Allowance (LTA) sets the total value of all the pension savings you can build up before having to pay extra tax. This figure is currently £1,073,100, but the charge for breaching the LTA has been removed from 6 April 2023, with the allowance expected to be abolished entirely from April 2024.
Although if your pension savings exceed the LTA, you’ll no longer be liable to pay the extra tax charge, Pension Commencement Lump Sums will continue to be limited to 25% of the current LTA.
You can find out more about the LTA and what it potentially means for you on the MoneyHelper website: https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/lifetime-allowance-for-pension-savings