This case study illustrates the value of membership of the Teachers’ Pension Scheme (Career Average Revalued Earnings — CARE) compared with a typical Defined Contribution (DC) pension arrangement.

Please note, it is designed for recruitment, induction and employee value proposition communications only. It is not intended to be a true estimate of actual CARE benefits, which are revalued annually whilst still in service, with growth equivalent to Consumer Price Index (CPI) + 1.6% per year.

CARE Pension — A Worked Example

Following a successful career in industry, Sam has recently commenced full-time employment as a Lecturer, and they are keen to explore how their retirement benefits might build in the CARE scheme, compared to an average Defined Contribution scheme.

Assumptions:

Retirement at Normal Pension Age; 10 years’ pensionable service; Lecturer salary £45,000 throughout the period; employee contribution rate is 10% throughout the period; CARE accrual rate 1/57th per year; CPI is 0.0% throughout period, so annual indexation is equivalent to 1.6% only. Figures are illustrative and rounded.

Employee Contributions:

Employee contribution at 10%: £4,500 per year (before tax relief). Contributions support the scheme but do not limit the pension earned under the CARE formula.

  • Annual pension earned each year: £45,000 ÷ 57 = £789
  • Total annual pension after 10 years: £789 × 10 = £7,890
  • Total pension + indexation = approximately £8,483 per year (payable for life)

Comparison with an average Defined Contribution Pension

In a Defined Contribution pension, contributions build an investment pot rather than a guaranteed income. Retirement income depends on investment returns, charges and how the pot is used at retirement.

Illustrative DC example (employee contribution £4,500 per year for 10 years):

  • Estimated pot after 10 years (3%–7% growth): approximately £51,600–£62,200
  • Indicative sustainable income at 4% drawdown: approximately £2,100–£2,500 per year

Why this matters

The Teachers’ Pension Scheme converts service into a predictable, inflation-linked annual pension. This provides long-term financial security that most Defined Contribution pensions struggle to match, making it a significant part of our total reward offer.

Disclaimer: This document is for illustrative EVP purposes only and does not constitute financial advice.