News

Contribution Consultation February 2019

Royal Observatory, Greenwich, London

11.02.2019

As part of its strategy to ensure that people are financially prepared for retirement, from 6 April 2019 the Government is increasing the minimum contributions that must be paid to meet the auto-enrolment legislation requirements. 

What does this mean for AE Section members?

If you are a member of the AE Section, the contributions that are paid into your Pension Pot will automatically increase to match the rates required by legislation.

Therefore, from April 2019, the amount that you pay will increase to 5% of Qualifying Earnings*, and Pearson’s contributions will increase to 3% of Qualifying Earnings.

DateYou payPearson paysTotal contributions
6 April 2018 – 5 April 20193%2%5%
6 April 2019 onwards5%3%8%

There are two reasons why it is important to understand the changes that are taking place:

  1. As a member of the AE Section your contribution rates will increase
  2. You may be able to save more while contributing less, by switching to the Money Purchase 2003 (MP03) Section of the Plan.

MP03 Section – Consultation on proposed changes

Currently members in the MP03 Section must pay a minimum contribution rate of 2.5% of pensionable salary**, but have the option to pay a higher percentage depending on their age. In addition, Pearson doubles the member’s contribution subject to certain limits.

To make sure that the MP03 Section continues to meet the auto-enrolment requirements, Pearson is currently undertaking a consultation regarding amendment to the Rules of the Plan so that the minimum level of contributions is increased from 2.5% to 3%. Subject to the outcome of this consultation, from April 2019, the minimum rate of contributions will change as follows:

There are two reasons why it is important to understand the changes that are taking place:

  1. As a member of the AE Section your contribution rates will increase
  2. You may be able to save more while contributing less, by switching to the Money Purchase 2003 (MP03) Section of the Plan.

MP03 Section – Consultation on proposed changes

Currently members in the MP03 Section must pay a minimum contribution rate of 2.5% of pensionable salary**, but have the option to pay a higher percentage depending on their age. In addition, Pearson doubles the member’s contribution subject to certain limits. 

To make sure that the MP03 Section continues to meet the auto-enrolment requirements, Pearson is currently undertaking a consultation regarding amendment to the Rules of the Plan so that the minimum level of contributions is increased from 2.5% to 3%. Subject to the outcome of this consultation, from April 2019, the minimum rate of contributions will change as follows:

DateYou payPearson paysTotal contributions
6 April 2018 – 5 April 20192.5%5%7.5%
6 April 2019 onwards3%6%9%

Reasons to consider switching from the AE Section to the MP03 Section

You may be able to switch to the MP03 Section if you meet the following criteria:

  • Earn over £10,000 a year;
  • Are aged over 22 years;
  • Are under State Pension Age.

The table below shows the additional benefits that you could receive through the MP03 Section of the Plan. In particular, please note that if you pay the minimum contribution rate of 3% of pensionable salary in the MP03 Section, Pearson will pay 6%. In the AE Section, you will pay 5% of Qualifying Earnings and Pearson will pay 3%.

BenefitMP03 SectionAE Section
ContributionsYou pay: between 3% and 8% of your pensionable salary. The maximum you can contribute depends on your age
You pay: 5% of Qualifying Earnings
Pearson pays: double what you pay in – between 6% and 16% of your pensionable salaryPearson pays: 3% of Qualifying Earnings
Life cover (lump sum)4x pensionable salary3x pensionable salary
A pension for your spouse/civil partner or nominated dependantYesNo
A pension for your childrenYesNo
Ill-health pensionYesNo

If you would like to join the MP03 Section, switching from the AE Section is simple and can be done by completing the online switching form. To ensure that you make the switch before the new AE contribution rates take effect you will need to complete and submit the form by no later than 2 April 2019. 

* Qualifying earnings are what you earn between a minimum £6,136 a year and a maximum £50,000 a year (for the 2019/20 tax year)
** Pensionable salary is your base salary as at 1 April


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