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CARE Scheme FAQs

Added: June 2014

(Printable Version)

Q1. What is a CARE pension Scheme?

A. CARE stands for Career Average Revalued Earnings

CARE is a form of defined benefit pension scheme. A defined benefit scheme guarantees a certain level of benefit at retirement, according to a fixed formula. In this respect it is similar to the current final salary sections of the NHS Pension Scheme.

Q2. How does a CARE pension work?

A. In a CARE scheme your pension is based on your pensionable pay right across your career. The pension you earn each year is based on pensionable pay in that year and is increased by a set revaluation rate, linked to inflation, for each year up to retirement or leaving. The final pension is calculated by adding together the pension earned in each year of membership.

Q3. How does this differ to a final salary scheme?

A. In a 'final salary' scheme the pension you receive for all of your years of membership is based on your pensionable pay at or close to retirement. This could be your best year's pensionable pay in the three years leading up to retirement (as in the 1995 section) or the average of the best three consecutive years in the 10 years leading up to retirement (2008 section).

Q4.  How much pension will I earn each year?

A. The amount of pension you earn each year is determined by a factor known as the 'accrual rate' and is usually shown as a fraction of your pensionable pay.

In the 2015 NHS Scheme the accrual rate is 1/54th. So if you earned £18,000 in a year you would earn a pension for that year of £18,000 x 1/54 = £333.

Note: The lower the bottom number of that fraction, the more of your salary you earn as a pension for each year of membership – so 1/54
is better than 1/60 or 1/80.

Q5. How is each year's pension revalued?

A. Your pension earned each year will be subject to 'revaluation' to account for inflation in the period before you retire or leave. In the 2015 NHS Scheme the revaluation is Consumer Price Index (CPI) inflation plus 1.5% per year. The pension earned in a Scheme year (April to March) is revalued on the first of April of the following Scheme year and each subsequent Scheme year until you retire or leave. For example, if CPI inflation in a year was 2% then CARE pensions would revalue by 3.5% in the following year.

If you leave the 2015 NHS Scheme before becoming entitled to claim your retirement benefits, your CARE pension would be revalued each year in line with CPI inflation only.

Here is a simplified pictorial illustration of how a CARE pension scheme works:

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NHS

Link to Scottish Government Website