A sensing system for measuring the angular displacement of a rotating shaft is disclosed. The sensing system comprises a rotor and a sensor assembly disposed within the rotor. The rotor is constructed and arranged to be securably mounted to the shaft such that the rotor rotates in concert with the shaft. Furthermore, the rotor defines a plurality of teeth extending radially inwardly towards a center of the shaft. The sensor assembly comprises a sensor housing and a magnet arrangement disposed within the housing. The magnet arrangement defines a magnetic flux path between the sensor assembly and the rotor. As a result, the magnet arrangement and the rotor cooperate to define a magnetic circuit. Changes in magnetic flux through the magnetic circuit can be measured to determine the angular displacement of the rotating shaft. Preferably, the sensing system of the present disclosure can be disposed within an existing housing with minimal effort, thereby, providing a reliable mechanism for precisely measuring the angular displacement of a rotating shaft.