How a CARE scheme works
Each year of membership is given a value based on your pay in that year and then revalued each year to reflect inflation.
From 1st April 2014 the LGPS became a Career Average Revalued Earnings (or CARE) scheme. A CARE scheme calculates pension using the formula:
Pension = Accrual Rate x Pensionable Pay
In a CARE scheme the pensionable pay for each year of membership is used, in order to calculate a pension amount for that particular year. That pension amount is then revalued each year in line with inflation (it should be remembered that, while your CARE pension might be expected to increase each year, the pension amount could be reduced should there be negative inflation). These individual pension amounts are then added together to arrive at the total pension payable from the scheme.
In the LGPS the accrual rate for the main scheme is 1/49th.
In the optional "50-50" scheme the accrual rate is 1/98th (that is half of a 1/49th) - but you pay only half the contribution rate of the main scheme.
Example (main scheme)
Tom earns £20,000, so his pension in year 1 is worked out as: £20,000 x 1/49th = £408
The £408 that Tom earns in year 1 is revalued at the end of the next year. So at the end of year 2, this part of Tom's pension is £408 x 1.04 = £424
Example (50-50 scheme)
If Tom opted to be in the 50-50 scheme instead of the main scheme and still earns £20,000, his pension in year 1 is worked out as: £20,000 x 1/98th = £204.
The £204 that Tom earns in year 1 is revalued at the end of the next year. So at the end of year 2, this part of Tom's pension is £204 x 1.04 = £212.