The FPS 2015 is a career average, or CARE, scheme. Career average scheme benefits are worked out based on a proportion of pay for each year of membership.
When you join the FPS 2015, a pension account will be opened for you and it will remain open for as long as you are a paying into the scheme. This is called an "active member's account".
If you are an active member in more than one job at the same time, you will have an active member's account for each job.
Your pension will build up year on year as follows:
1/59.7 x pensionable pay = earned pension credit
1/59.7 is the current accrual rate for the scheme. This rate could change every four years, when the whole scheme is valued by the Scheme Actuary to work out how much benefits cost.
Let's suppose your pensionable pay plus any assumed pensionable pay during your first scheme year (1 April 2015 to 31 March 2016) is £29,850. Your earned pension for that year would be:
1/59.7 x £29,850.00 = £500.00
At midnight on 31 March each year, an "index adjustment" is applied. This would be a percentage increase or decrease stated in an Order issued by HM Treasury, reflecting any national change in average weekly earnings. It is applied to ensure that the pension you hold in your account each year maintains its value on a year by year basis.
If during the scheme year you have been on leave, on reduced contractual pay or no pay due to sickness or injury, or have been on relevant paid child related leave or reserve forces leave, then for that period your pension is based on your assumed pensionable pay.
An example of how your pension will build up in your pension account each year is shown below:
|Date From||Date to||Account Balance(starting)||HM Treasury Order Rate*||Opening Balance||Actual Pay||Build up Rate||Pension Build up in year||Account Balance (Closing)|
*Rates shown are for illustration only
Your active member's account would continue to build in this way for as long as you remain an active member of the scheme. Also, if you were to remain an active member beyond the scheme's normal pension age (60), an "age addition", i.e. an extra amount of pension, worked out in accordance with the guidance of the Scheme Actuary, would be added.
If you leave employment or opt out before becoming entitled to immediate payment of pension, your active member's account would be closed and your pension transferred to a "deferred member's account"