As part of its strategy to ensure that people are financially prepared for retirement, from 6 April 2019 the Government increased 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 have automatically increased to match the rates required by legislation.
Therefore, from April 2019, the amount that you pay increased to 5% of Qualifying Earnings*, and Pearson’s contributions increased to 3% of Qualifying Earnings.
| Date | You pay | Pearson pays | Total contributions |
|---|---|---|---|
| 6 April 2018 – 5 April 2019 | 3% | 2% | 5% |
| 6 April 2019 onwards | 5% | 3% | 8% |
MP03 Section – Consultation on minimum contribution changes
To make sure that the MP03 Section met the auto-enrolment requirements, Pearson undertook a consultation regarding amendment to the Rules of the Plan so that the minimum level of contributions in the section was increased from 2.5% to 3%. Following the consultation period, it has been agreed that from 6 April 2019, the minimum rate of contributions has changed as follows:
| Date | You pay | Pearson pays | Total contributions |
|---|---|---|---|
| 6 April 2018 – 5 April 2019 | 2.5% | 5% | 7.5% |
| 6 April 2019 onwards | 3% | 6% | 9% |
Don’t forget, if you are a member of the MP03 Section, you have the opportunity to pay a higher amount, as follows:
| Age | Your maximum contribution | Pearson pays | Total maximum contributions |
|---|---|---|---|
| Under 30 | 5% | 10% | 15% |
| 30-44 | 6% | 12% | 18% |
| Over 45 | 8% | 16% | 24% |
Please complete the MP03 Section contribution change form if you wish to change your contribution rate.
Reasons to consider switching from the AE Section to the MP03 Section
You may be able to switch from the AE Section 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%.
| Benefit | MP03 Section | AE Section |
|---|---|---|
| Contributions | You 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 salary | Pearson pays: 3% of Qualifying Earnings | |
| Life cover (lump sum) | 4x pensionable salary | 3x pensionable salary |
| A pension for your spouse/civil partner or nominated dependant | Yes | No |
| A pension for your children | Yes | No |
| Ill-health pension | Yes | No |
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.
* 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, subject to the Plan earnings cap.
