The full name of the career average pension scheme, introduced to teachers in 2015, is CARE. It is a Career Average Revalued Earnings scheme. This is a type of defined benefit scheme offered to you by the Teachers’ Pension Scheme. The benefits when you retire are calculated on your earnings and the length of your membership in the scheme. So far, so good; it seems simple enough. However, this is where the simplicity ends. We will try to explain more.
How Career Average schemes work
There are some similarities between the final salary scheme and the average career scheme. Both are defined benefit pensions. However, there are significant differences in the way these benefits are calculated.
The final salary scheme takes an average of the last few years of your employment. The career average scheme offers an income in retirement calculated as a proportion of your average earnings across the whole of the membership and adjusted for inflation.
The Teachers’ Pension Scheme has many detailed rules about what is constituted as earnings and when a person is an active or deferred member. When reading up on what counts towards your pension, you need to look for the key term: “pensionable earnings.’
The longer you work within the scheme, the more you will benefit in retirement. The longer you work, the better the effect on your accrual rate – or the fraction of your career average revalued earnings for each year of membership.
For those in teaching, who earn much more at the end of their career, this change in 2015 meant the benefits offered were lower than they would have previously been. Not all members were automatically transferred into the new scheme, and some were transitionary members, who moved across after a time.
If you are worried that your pension might not offer you security in retirement, you should contact an Independent Financial Advisor for support and expert advice.
The content in this article was correct on 4th July 2020. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.