The initial point to understand is that if you began teaching after April 1, 2015, you are part of the 2015 Career Average scheme.
Even if you were previously a member, all the pension you accumulate now falls under this scheme. Therefore, let’s concentrate on how this contemporary and equitable system operates.
Teacher’s Pension Scheme 2015 (CARE)
The 2015 Scheme is a Career Average Revalued Earnings (CARE) plan. The name may seem somewhat technical, yet the idea is beautifully straightforward and equitable.
Formula
Your Pensionable Earnings for the Year ÷ 57 = The Pension You’ve Earned That Year
Let’s look at the two simple parts of that sum.
Your Pensionable Earnings
This is the salary that counts towards your pension. It refers to your gross, basic pay, which encompasses any allowances such as a TLR (Teaching and Learning Responsibility) payment. Typically, it does not cover additional earnings like overtime for extra hours worked.
The Accrual Rate (1/57th)
This is the essential part. Each year you contribute, you accumulate a pension that amounts to 1/57th of your eligible earnings for that year. Consider it as saving a secure portion of your future retirement income, year after year.
Revalued
Now, let me share the truly wonderful aspect. The pension you accumulate each year doesn’t merely remain stagnant. It actually increases! To ensure that your diligently earned pension retains its purchasing power over the years, it undergoes a process of “revaluation” (an increase) annually.
This annual increase is determined by the government and is intended to surpass inflation, allowing your pension fund to grow consistently throughout your working life. When you reach retirement, all these annual pension increments are summed up to provide you with your total lifetime annual pension.
Example
Imagine a teacher named John has pensionable earnings of £42,000 this year.
Step 1: Calculate this year’s pension block. £42,000 ÷ 57 = £736.84
Ben has added £736.84 to his annual pension pot this year.
Step 2: Watch it grow. That £736.84 is now “banked” for him and will be revalued every year until he retires. Next year, he’ll do the same thing with his earnings for that year, adding another block to his growing pot.
Teacher Pension Calculator (UK)
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Teacher Pension Calculator (UK)