You pay basic contributions and tier contributions, which depend on your pensionable pay and your membership tier, as shown in the table.
|Accrual rate||Basic contributions||Tier contributions|
|1/60th||10% of pensionable pay||Top tier||10% of the Lower Earnings Limit (LEL)|
|Middle tier||2.5% of LEL|
|Basic tier||no tier contribution|
|1/70th||8% of pensionable pay||Top tier||8% of LEL|
You started paying contributions when you joined the Plan, and you will stop paying when you retire or leave the Plan. Your contributions are not paid into an individual account for you but into a fund for the Plan from which all benefits are paid. The Company is responsible for ensuring the fund has enough money in it to cover everyone’s benefits.
How much does it cost?
Your contributions into the Plan qualify for tax relief. This means that for a basic rate taxpayer, every £1 you contribute actually only costs you 80p (60p for a higher-rate taxpayer). If you pay by SMART, you can make savings on National Insurance too, bringing the cost of contributing to the Plan even lower.
SMART is a salary sacrifice arrangement, where instead of you paying contributions from your salary, the Company pays an amount equal to what your contributions would have been straight into the Plan. Your pay is then reduced by the same amount.
Giving your pension a boost
You might also be paying additional voluntary contributions (AVCs). This is a tax-efficient way of saving a bit extra for your retirement. Unlike your contributions into the Plan, AVCs are paid into an account in your name. How much you receive from your AVC fund at retirement depends on how well your investments have performed. AVC investments are provided to the Plan by two insurance companies, Prudential and Fidelity.