What Is a Career Average Pension?
A career average revalued earnings (CARE) pension is a type of defined benefit (DB) scheme. Like a final salary pension, it promises a guaranteed income in retirement based on a formula. The key difference is how that formula works: instead of basing your pension on your salary at or near retirement, a CARE scheme calculates your pension based on your earnings throughout your entire career in the scheme.
Each year you are a member, a portion of your pensionable earnings for that year is recorded and added to your accumulated pension. These annual slices are then revalued (increased) each year in line with a specified measure — typically the Consumer Prices Index (CPI) or average earnings growth — to protect their value against inflation.
By retirement, your total pension is the sum of all these revalued annual slices. This means every year of your career contributes to your final pension, not just the years when your salary was highest.
How Is a CARE Pension Calculated?
The calculation uses three components for each year of membership:
- Pensionable earnings — your qualifying salary for that year (which may differ from your total pay)
- Accrual rate — the fraction of earnings you earn as pension each year (e.g. 1/49th, 1/57th)
- Revaluation — the annual increase applied to each year's banked pension to protect against inflation
Worked Example
Suppose you earn £35,000 in year one and the accrual rate is 1/49th:
- Year 1 pension earned: £35,000 ÷ 49 = £714.29
- If CPI is 3% that year, the £714.29 is revalued to £735.71 at the start of year 2
- In year 2, you earn £37,000: pension earned = £37,000 ÷ 49 = £755.10
- Your total banked pension is now £735.71 + £755.10 = £1,490.81
- This process continues for every year of membership
Major UK CARE Pension Schemes
Most large public sector pension schemes in the UK have moved to a CARE model. Many private sector DB schemes have also adopted CARE as an alternative to final salary.
| Scheme | Accrual Rate | Revaluation | Normal Pension Age |
|---|---|---|---|
| NHS Pension (2015 section) | 1/54th | CPI + 1.5% | State Pension Age |
| Teachers' Pension (career average) | 1/57th | CPI + 1.6% | State Pension Age |
| Civil Service (alpha) | 1/43.1st | CPI | State Pension Age |
| LGPS (from 2014) | 1/49th | CPI | State Pension Age |
| Armed Forces (AFPS 2015) | 1/47th | CPI | 60 |
| Firefighters' (2015) | 1/59.7th | CPI | 60 |
CARE vs Final Salary: Key Differences
| Feature | Career Average (CARE) | Final Salary |
|---|---|---|
| Pension based on | Average earnings across career (revalued) | Salary at or near retirement |
| Best for | Flat career earnings or frequent job changes | Steeply rising salary near retirement |
| Inflation protection (accrued benefits) | Yes — revaluation applied annually | Limited — linked to final salary only |
| Cost to employer | Generally lower and more predictable | Higher and more volatile |
| Risk of late-career salary drop | Low impact — earlier years still count | High impact — pension based on lower final salary |
| Typical accrual rate | 1/49th to 1/57th | 1/60th to 1/80th |
Who Benefits More from CARE?
CARE schemes tend to be fairer for lower and mid-level earners whose salaries do not increase dramatically over their careers. They also benefit those who:
- Work part-time at various points in their career
- Change roles or take career breaks
- Have a salary that peaks in the middle of their career rather than at the end
- Are promoted early but plateau in later years
Conversely, someone who starts on a modest salary but receives significant promotions in the final decade before retirement would typically receive a higher pension under a final salary scheme.
How CARE Pensions Are Revalued
Revaluation is what makes CARE pensions keep pace with the cost of living. Without revaluation, a pension slice earned 30 years ago on a much lower salary would be worth very little in today's terms.
The revaluation method varies by scheme:
- CPI (Consumer Prices Index) — used by most public sector CARE schemes for in-service revaluation
- CPI + fixed percentage — some schemes (e.g. NHS, Teachers') add a bonus on top of CPI
- Average earnings growth — some private sector schemes use this measure
- Fixed rate — a small number of schemes use a fixed annual percentage
Early Retirement and CARE Pensions
If you retire before your scheme's normal pension age (NPA), your CARE pension will be reduced to reflect the fact that it will be paid for longer. This is known as an early retirement reduction factor.
The reduction varies by scheme but is typically 3–5% for each year you retire early. For example, if your NPA is 67 and you retire at 60, you might face a reduction of 21–35% on your pension.
Conversely, if you work beyond your NPA, some schemes apply a late retirement enhancement, increasing your pension to reflect the shorter expected payment period.
Can You Transfer a CARE Pension?
Yes. As with any DB pension, you can request a cash equivalent transfer value (CETV) from your CARE scheme and transfer to a defined contribution arrangement such as a SIPP or personal pension.
Key points to consider:
- If the CETV exceeds £30,000, you must take regulated financial advice before the scheme can process the transfer
- Transferring means giving up a guaranteed, inflation-linked income for life
- Transfer values from CARE schemes may be lower than from equivalent final salary schemes because CARE benefits are calculated differently
- Public sector schemes (NHS, Teachers', LGPS, etc.) are unfunded or backed by the government, making the guaranteed income particularly secure
Deferred CARE Pensions
If you leave your employer before retirement, your CARE pension becomes a deferred pension. Your accrued benefits are preserved and continue to be revalued each year, typically in line with CPI (though the revaluation rate for deferred benefits may differ from the in-service rate).
Your deferred pension will become payable at your scheme's normal pension age, or earlier if you choose to take an actuarially reduced pension.
Death Benefits from a CARE Pension
CARE pensions provide death benefits similar to other DB schemes. Typically these include:
- A lump sum death-in-service benefit (usually 2–3x salary) if you die while an active member
- A spouse's or civil partner's pension (usually 50% of your pension)
- Children's pensions payable until age 18 or 23
For a detailed comparison of how death benefits differ between scheme types, see our guide to DC vs DB death benefits.
Next Steps
If you are a member of a CARE pension scheme, request a benefit statement from your scheme administrator to understand exactly what you have accrued. If you are considering your options — whether that is early retirement, transferring, or maximising your benefits — speak to an FCA-regulated pension adviser who can assess your individual circumstances.
For further reading, explore our guides on DB pension accrual rates, early retirement reduction factors, and whether it is worth transferring a final salary pension.