Glossary · UK
What is Career Average Revalued Earnings (CARE) Scheme?
A type of defined benefit pension where each year's pension is based on that year's pay, revalued for inflation, rather than on final salary at retirement.
Full Definition
A Career Average Revalued Earnings (CARE) scheme is a defined benefit pension design in which a member builds up a slice of pension in each year of membership, calculated as a fraction of that year's pensionable earnings (for example 1/49th or 1/57th, depending on the scheme). Each year's accrued slice is then increased -- "revalued" -- in line with an index such as CPI inflation (or, in some public sector schemes, average earnings) every year until the member retires, so past accrual keeps pace with the cost of living rather than losing value in real terms. This differs from an older-style final salary scheme, where the whole pension is calculated using salary at (or near) retirement, which tends to reward employees whose pay rises fastest late in their career; CARE schemes are generally seen as fairer for people who move to part-time work, take career breaks, or whose earnings do not rise sharply towards the end of their working life. Most UK public sector pension schemes -- including the Local Government Pension Scheme, the NHS Pension Scheme, the Teachers' Pension Scheme and the Civil Service alpha scheme -- moved from final salary to CARE structures following reforms introduced from 2014-2015 onwards, though many members retain "protected" final salary benefits for service built up before the change.