Contribution Flexibility - 50/50

Option to pay less

From April 2015 there is a new option in the scheme called ‘50/50’. You can elect for this option at any time, pay half your normal contributions and build up half your normal pension.

 How does 50/50 work?

There are two sections in the scheme from 1 April 2015 – the main section and the 50/50 section. The main section of the Scheme is the section you will be placed in. In that section, you pay normal contributions and your pension builds up in the normal way.

The 50/50 section is a new option. You will be able to elect to move to this section if you wish. If you do so, you will then pay half contributions but, whilst you are in the 50/50 section, you will only be building up half your normal pension. If you have more than one employment you can elect for the 50/50 option in one, some or all your employments.

Regardless of the section you are in, you get full life assurance cover.

Who can elect for 50/50?

Any member can elect to pay into the 50/50 section at any time. An election to join this section must be made in writing to your employer.

How long can you remain in the 50/50 section?

The 50/50 section is designed to be a short-term option for when times are tough financially. Because of this your employer is required to re-enrol you back into the main section of the scheme every three years. This will be carried out in line with your employer’s automatic re-enrolment date. Your employer will tell you when this is if you’re in the 50/50 section of the scheme.  If you wish to continue in the 50/50 section at that point you would need to make another election to remain in that section.

You can choose to revert back to the main section of the scheme at any time by informing your employer in writing and you will then start to build up full benefits in the main section from your next available pay period.

If you are in the 50/50 section and move onto a period of no pay due to sickness or injury, you will be moved back into the main section of the Scheme from your next available pay period, if you are still not receiving pay at that time.

 Example: Jennifer - Receptionist in a local fitness centre

Jennifer works full-time and her actual pay is £24,500 a year, her contribution rate in the main section of the scheme is 5.8%. Jennifer however, is finding it difficult financially since she has moved into her new house and she has decided to elect to take up the 50/50 option.

Main section compared to 50/50 section for one year in the Scheme

Main Section

50/50 Section

Gross Contribution in the main Scheme (for 1 year)

5.8% = £1,421.00

Gross Contribution in the 50/50 option (for 1 year)

2.90% = £710.50

 

Pension build up before revaluation in the main Scheme (for 1 year)

£500 for each year in Retirement

Pension build up before revaluation in the 50/50 option (for 1 year)

£250 for each year in Retirement

 

Lump Sum Life Assurance Cover

£73,500

Lump Sum Life Assurance Cover

 £73,500

 

Jennifer would pay less in contributions in the 50/50 section – 2.90% instead of 5.8% and she would build up half the pension in the 50/50 section, £250, payable every year in retirement, compared to a pension of £500 if she was in the main section.

But remember, the value of any lump sum life assurance cover payable (three times annual pensionable pay) remains the same regardless of which section of the scheme Jennifer pays into.