How a CARE scheme works
From 1st April 2014 the LGPS became a Career Average Revalued Earnings (or CARE) scheme.
A CARE scheme calculates pension using the formula:
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 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.
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