Example Calculations

As with most new things it is always good to consider an example:

 Step 1 – Annual Accrual

You will build up 1/54th of your pensionable pay in a year      

So for example if you were at the top of  AfC Band 5 on £30,112 in that year you would accrue £557.63 per annum of pension.

Step 2 – Re-valuation

This accrued pension once in the pot cannot be taken away and will be Re-valued each year by an agreed formula (CPI + 1.5%) until you retire.

Assuming 3.5% re-valuing, the ‘year 1 pot’ would be increased at the start of year 2 to:

£557.63 x 3.5% to give = £577.14

This newly increased amount will be re-valued each year until retirement

After an assumed 20 years the original £557.63 would have increased to £1,109.56

Step 3 – Averaging

This process is then repeated for each year that you work:

The amount that would be in each year’s pot will depend upon what the pensionable earnings were in the start of each year and the respective revaluing amount.

Step 4 – The ‘Final Pot’

Each year’s subsequent re-valued pots are then added together and you can draw your pension.

This is basically how your new scheme will work, but it is harder to estimate the final benefits as there are numerous variables, such as each year’s pensionable earnings and future rates of inflation.

To go in to more detail about your personal situation then please contact one of our advisors who will be happy to work this out for you.