Career Average Schemes
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Career average schemes are becoming more popular as companies
look for alternatives to the traditional final salary schemes.
Career average schemes provide a pension related to the level of
your salary over your entire career with the company. If you have
read the State Pension guide you may be seeing similarities with the
State Additional Pension which works in a similar way.
The build up (or accrual) of your pension works very similarly to
a final salary scheme except that instead of calculating your
pension when you leave the pension is calculated each year.
Therefore each year the following is calculated
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Salary
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Current Years Pension
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Accrual Rate
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Salary - This is your current salary in that year. As for a final
salary scheme this may not be the same as the total amount you get
paid that year (see above).
Accrual Rate - This is simply a number which determines the rate
at which your pension builds up. The lower the number the quicker
the pension will accumulate with your service.
The amounts of Current Years Pension are recorded each year. When you leave the scheme
they are all added up to give your total pension. Some schemes
increase each years worth of pension in line with inflation
(salaries or prices dependent upon the scheme) or by some other
amount. However there is no obligation to do so.
The important thing to remember about career average schemes is
that they are linked to your salary over your entire career.
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Read the guide to
investment in the pensions guide. It explains what you need to
think about before investing for your retirement.
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If you have a pensions
related question then please let us
know.
If it's something other people
would find useful then we will post an answer in our Frequently Asked Question
(FAQ) area.
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Use our online calculator
to get an estimate of your basic state pension.
Its free and
simple to use you can even include it on your own website!
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Get the FREE Pension calculators from Essential Pensions.
No money, no
registration, just include one line of HTML in your web page.
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