Annual pension
(30 × £40,000) / 80
= £15,000 per year
How does my pension build?
How your pension grows over time
You joined the Scheme before 1 April 2018 and are building benefits in the Final Salary section of the Scheme. Your pension builds year by year while you are a member of the Scheme. The longer you remain in the Scheme, the more pension you build for your future.
If you leave the Scheme before retiring, your pension will continue to increase in line with Consumer Price Index (CPI), so long as it is greater than 0% before it is paid, helping protect its value against inflation.
How your pension builds
For each year, or part year, that you are a member of the Scheme, you build up pension based on your pensionable salary.
These amounts build up over time to provide your total pension benefits when you retire.
Key points:
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For each year of pensionable service you build up a pension of 1/80th of your final pensionable salary plus a tax-free lump sum of three times your pension
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Your tax-free cash sum is a one-off payment made at the same time your pension commences
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Your pension provides a guaranteed income for life
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Benefits can build for up to 40 years to Normal Pension Age (NPA), plus up to a further five years after NPA
-
Once in payment, pensions increase in line with CPI
How your pension increases over time
Your pension continues to grow while you remain an active member of the Scheme.
Each year, the pension you have already built up is increased, helping it keep pace with the cost of living and maintain its value over time.
Key points
- Your pension increases each year CPI + by 1.5%
- These increases apply while you remain an active member of the Scheme
- This helps protect the long-term value of your pension benefits
What this could look like
The example below shows how a pension can build over time. A member:
- earns £20,000 pensionable salary each year
- remains in the Scheme for four years
- has annual CPI increases assumed at 2%
Each year, their pension builds based on 1/60th of their pensionable salary. The pension already built up is then increased each year while they remain an active member.
An illustrative CARE example
Using £20,000 as the pensionable salary, with revaluation at 3.5%; £20,000 × 1/60 = £333 and assuming your salary remains the same throughout.
Year 2
Your pension at the end of the year would be calculated as follows:
£333 + (£333 x 3.5%) = £333 + (£333 + £11.65)
Your built up pension = £677.65 pa
Year 3
Your pension at the end of the year would be calculated as follows:
£333 + (£677.65 x 3.5%) = £333 + (£677.65 + £23.71)
Your built up pension = £1,034.36 pa
Year 4
Your pension at the end of the year would be calculated as follows:
£333 + (£1,034.36 x 3.5%) = £333 + (£1,034.36 + £36.20)
Your built up pension = £1,403.56 pa
This pattern continues every year you are an active member of the Scheme.
In simple terms
- You build pension every year you are in the Scheme
- Each year adds 1/60th of your pensionable salary
- The pension you have already built up increases each year you remain an active member
- This means your pension grow through both new contributions and annual increases
What this could look like
Linda retires at her Normal Pension Age with 30 years of service in the Scheme and her final pensionable salary at the date of retirement is £40,000 per year. Her benefits would be:
Tax-free lump sum
£15,000 × 3
= £45,000
What counts towards your pension?
Only pensionable salary is used when calculating your pension benefits. Payments such as overtime are not included in your pension calculations.
