What Is an Accrual Rate?
An accrual rate is the fraction of your pensionable salary (or career average earnings) that you earn as annual pension for each year you are a member of a defined benefit (DB) scheme. It is the building block of your pension calculation.
Common accrual rates include 1/60th, 1/80th, 1/49th, and 1/57th. The fraction tells you how quickly you build up pension: a 1/49th rate means you earn 1/49th of your pensionable earnings as annual pension for each year of membership, which is more generous than 1/60th or 1/80th.
The DB Pension Formula
Every defined benefit pension uses a variation of this basic formula:
Final Salary Schemes
Annual pension = Final pensionable salary × Years of service × Accrual rate
For example, with a final salary of £50,000, 30 years of service, and a 1/60th accrual rate:
£50,000 × 30 × 1/60 = £25,000 per year
Career Average (CARE) Schemes
For career average schemes, the formula is applied year by year. Each year's pensionable earnings are multiplied by the accrual rate, and the resulting amount is banked and revalued annually.
Common Accrual Rates Across UK Schemes
| Scheme | Type | Accrual Rate | Automatic Lump Sum? |
|---|---|---|---|
| Typical private sector final salary | Final salary | 1/60th | No (commute pension for lump sum) |
| Older private sector final salary | Final salary | 1/80th | Yes (3/80ths per year) |
| NHS Pension (1995 section) | Final salary | 1/80th | Yes (3/80ths per year) |
| NHS Pension (2008 section) | Final salary | 1/60th | No |
| NHS Pension (2015 section) | CARE | 1/54th | No |
| Teachers' Pension (final salary) | Final salary | 1/80th | Yes (3/80ths per year) |
| Teachers' Pension (career average) | CARE | 1/57th | No |
| Civil Service (classic) | Final salary | 1/80th | Yes (3/80ths per year) |
| Civil Service (alpha) | CARE | 1/43.1st | No |
| LGPS (pre-2014) | Final salary | 1/60th or 1/80th | Varies |
| LGPS (from 2014) | CARE | 1/49th | No |
1/60th vs 1/80th: Understanding the Difference
The distinction between 1/60th and 1/80th schemes is one of the most common sources of confusion in pension planning. On the surface, 1/60th appears clearly superior because you earn a higher fraction of salary each year. However, the picture is more nuanced.
1/80th Schemes with Automatic Lump Sum
Many 1/80th schemes (including older NHS, Teachers', and Civil Service pensions) provide an automatic tax-free lump sum of 3/80ths of your final salary for each year of service. This is paid on top of your pension without requiring you to give up any income.
| Feature | 1/60th Scheme | 1/80th Scheme (with 3/80ths lump sum) |
|---|---|---|
| Annual pension (30 years, £50,000 salary) | £25,000 | £18,750 |
| Automatic lump sum | None | £56,250 (3/80 × 30 × £50,000) |
| Additional lump sum available | Yes (commute pension) | Yes (commute pension further) |
| Total initial value (pension + lump sum) | Higher ongoing income | Lower income but large upfront cash |
How Accrual Rates Affect Transfer Values
Your accrual rate directly impacts the cash equivalent transfer value (CETV) of your DB pension. A higher accrual rate means higher annual pension benefits, which generally leads to a larger CETV. However, transfer values are also influenced by:
- Current interest rates — lower rates increase transfer values; higher rates decrease them
- Scheme funding level — underfunded schemes may reduce CETVs
- Your age — older members generally receive lower transfer values relative to the pension given up
- Revaluation and indexation — schemes with generous inflation protection have higher transfer values
- Spouse and dependant benefits — schemes with generous death benefits have higher transfer values
Part-Time Service and Accrual
If you work part-time in a DB scheme, your accrual rate remains the same, but your pensionable earnings are based on your actual part-time salary. In some schemes (particularly public sector), your service is recorded as a fraction of full-time equivalent.
For example, if you work 60% of full-time hours for 10 years in a 1/60th final salary scheme with a full-time equivalent salary of £40,000:
- Your pensionable salary each year is £24,000 (60% of £40,000)
- But your pension at retirement is based on your final full-time equivalent salary, scaled for part-time service
- 10 years at 60% = 6 years full-time equivalent service
- Pension = £40,000 × 6/60 = £4,000 per year
Changes to Accrual Rates Over Time
Many employers have reduced accrual rates over the years as part of cost-cutting measures. Common changes include:
- Moving from 1/60th to 1/80th for future accrual while preserving existing benefits at the original rate
- Switching from final salary to CARE, often with a different accrual rate (e.g. LGPS moved from 1/60th final salary to 1/49th CARE)
- Closing DB schemes entirely and moving members to defined contribution arrangements — see our guide on DB scheme closure
Maximising Your DB Pension
Understanding your accrual rate helps you make better decisions about your pension:
- Check your benefit statement — confirm your accrual rate and years of qualifying service
- Understand the full package — look at the accrual rate alongside automatic lump sums, spouse's benefits, and inflation protection
- Consider additional contributions — some schemes allow you to buy added years or additional pension at a higher accrual rate
- Plan for early retirement carefully — early retirement reduction factors can significantly reduce your pension
- Take advice before transferring — a higher accrual rate makes your DB pension more valuable; ensure you understand what you would be giving up
Next Steps
Request an up-to-date benefit statement from your pension scheme to confirm your accrual rate, years of service, and projected pension at retirement. If you are comparing options or considering a transfer, speak to an FCA-regulated pension adviser who can analyse your specific scheme benefits.
For related reading, see our guides on career average pensions, DB pension lump sum commutation, and FCA advice requirements for DB transfers.