Pearson : Remuneration Report

Directors' Remuneration Report

Sherry Coutu CBE

Chair of Remuneration Committee

Key messages from the Remuneration Committee

• - The Directors' Remuneration Policy approved by shareholders at the 2023 AGM was instrumental in allowing Pearson to successfully recruit our new Chief Executive, Omar Abbosh, a highly regarded global leader. Omar's remuneration arrangements are consistent with the Remuneration Policy.

• - As part of our long-standing commitment to an ongoing and transparent dialogue with shareholders and their advisers, we undertook an extensive engagement exercise both prior to and following the 2023 AGM. Shareholder input is very important to the Committee when developing remuneration proposals and arrangements.

• - The Committee considered performance outcomes for 2023. The annual incentive outcome for Executive Directors is 85% of maximum reflecting another year of strong financial and strategic progress in 2023. The long-term incentive granted in 2021 will vest at 85% of maximum considering the earnings growth and value created for shareholders over the three-year performance period.

• - A thorough review was conducted ahead of the release of the third and final tranche of the co-investment award for the previous Chief Executive, considering performance underpins, TSR and broader company performance, and stakeholders' experience and it was determined that this tranche should vest in full.

• - Consistent with historical and best practice, the Committee also reviewed the implementation of the Directors' Remuneration Policy for 2024, in particular the performance framework, to ensure it appropriately supports delivering on Pearson's forward-looking strategy. No changes to metrics will be made for 2024, although the carbon metric will switch from the AIP to the LTIP to reflect the long-term nature of the goal.

• - The Committee remains focused on ensuring remuneration policies and practice for all Pearson's colleagues are consistent with our need to attract and retain the right talent for the Company's digital future, and are appropriately aligned to Pearson's forward-looking strategy, purpose, and mission, vision, and values.

• - There was no payment for loss of office upon Andy Bird's retirement from the Company and the Committee determined that Andy would be treated as a 'good leaver' in respect of his outstanding awards under the LTIP, in accordance with the Policy and LTIP rules.

Terms of reference

The Committee's terms of reference are in line with the 2018 UK Corporate Governance Code and are available on the Governance page of the Company website at pearsonplc.com (a summary of the Committee's responsibilities is on page 129).

Board Committee attendance

There were five scheduled meetings of the Remuneration

Committee in 2023. Attendance by Directors was as follows:

Meetings

Committee members attended

Sherry Coutu CBE	5/5
Esther Lee	5/5
Tim Score	5/5
Annette Thomas	5/5

Dear Shareholder

On behalf of the Board, I am pleased to present the 2023

Directors' Remuneration Report.

For a third consecutive year, Pearson has delivered a strong financial performance. Underlying Group sales increased by 5%, and Group adjusted operating profit was up 31% versus

2022. This was supported by the ongoing work to streamline the business and make it more efficient, with delivery of £120m of cost savings helping to drive an improvement in adjusted operating profit margin to 16%.

Pearson has continued to generate strong free cash flow enabling the Company to maintain a robust financial position whilst also supporting ongoing investment in the business. This is fuelling Pearson's evolution, particularly in digital and generative AI which are changing the way that people learn for good. Strong cash generation has enabled the delivery of returns for shareholders, with a £300m share buyback programme supplementing a progressive ordinary dividend. The Board have also announced our intention to extend the share buyback programme by £200m. Reflecting the strong performance in 2023 and its confidence in the outlook for the business, the Board is recommending a 6% increase in the final dividend for a full year dividend of 22.7 pence per share.

Additionally, Pearson has seen change in the Executive Directors with the appointment of a new Chief Executive, Omar Abbosh, who joined on 8 January 2024 and the retirement of Andy Bird, who stepped down from his role as Chief Executive, but remains with the Company until 31 March 2024 to ensure a smooth transition. We will also welcome Alison Dolan, Non-Executive Director, to the Committee from 1 April 2024.

Directors' Remuneration Report continued

Shareholder engagement

While the Committee very much appreciated the support shown by the majority of shareholders, it was naturally disappointing that a significant minority of shareholders voted against the 2023

Directors' Remuneration Policy.

In advance of the 2023 AGM, the Committee had conducted an extensive consultation process, receiving feedback from, or directly engaging with, approximately 55% of Pearson's ownership as well as the key proxy advisers.

There was an understanding of the challenges faced by Pearson and the need for a Policy that adequately acts as an attraction, retention, and incentivisation tool for global talent, particularly in the US which represents the majority of the Company's business, and growth prospects. We acknowledge that these challenges are not unique to Pearson and have in the last year, been widely raised and discussed by a range of stakeholders. That said, our engagement exercise highlighted that the extent of the increases to variable incentive opportunities in both the annual and long-term incentive plans was principally too much for some shareholders to support.

Following the outcome at the AGM and given Pearson's commitment to an ongoing and transparent dialogue with shareholders and their advisers, a further engagement exercise was initiated to provide the opportunity for shareholders to offer any additional views on Pearson's executive remuneration arrangements following the AGM vote. We received a relatively small number of responses, often welcoming the offer to engage again, but noting that there was no requirement given the extensive consultation prior to the AGM, as referred to above.

While understanding and acknowledging the diverse views of our shareholders, the Committee continues to believe that the Policy is necessary for remaining competitive in the global talent market and driving sustainable, profitable growth. This was reaffirmed by the Board's appointment of Omar Abbosh as the Company's new Chief Executive. Omar is a highly regarded global leader with over 30 years of experience in enterprise technology and joined Pearson from Microsoft, one of the world's largest multinational technology companies.

Pearson remains committed to a constructive and positive relationship with all its shareholders and their advisers and will continue to engage widely as appropriate going forward.

Incentive outcomes for 2023

2023 AIP

The strong financial and strategic progress delivered in 2023 resulted in a formulaic AIP outcome for Executive Directors of 85% of maximum, with outperformance against the stretching targets for Adjusted Operating Profit, Sales and Free Cash Flow. Overall, the Committee was satisfied that the formulaic outcome was reflective of the performance achieved.

2021 LTIP

The LTIP granted in 2021 will vest in 2024 at 85% of maximum, principally reflecting EPS performance above the upper end of the stretching range and exceptional upper quartile TSR performance over the three-year performance period. The shares vesting will remain subject to a two-year holding period. Further details are set out on page 120.

Final tranche of Andy Bird's co-investment award

The third and final tranche of the one-off co-investment award granted to Andy Bird, vested following 31 December 2023. Similar to the first two tranches, vesting was subject to achievement of performance underpins linked to strategic progress and there being no significant ESG issues resulting in significant reputational damage. The third tranche was also subject to an additional TSR underpin.

The Committee undertook a rigorous assessment of the relevant performance underpins as well as a holistic review of broader Pearson performance and the experience of all stakeholders.

In its assessment, the Committee followed the framework developed and disclosed in prior years. Pearson's TSR over the period was 76%, resulting in the creation of over £3bn of shareholder value over the period and significantly in excess of the required threshold. Pearson's TSR was ranked 21 out of 92, above the upper quartile (71.8%) TSR of the FTSE 100. As such, the Committee determined that the third tranche of the award would vest in full and detailed disclosure of the Committee's deliberations in this regard is set out on pages 121 and 122.

Leadership changes

Appointment of Omar Abbosh, new Chief Executive

Omar Abbosh was appointed as Chief Executive on 8 January 2024. Omar has a deep understanding of the dynamic business and technology landscape having helped to shape and execute successful strategies in a world of disruption. This positions him very well to build on the foundations that have been laid over the last few years and lead Pearson through its continued journey as a digital-first consumer-focused lifelong learning company. The

Committee looks forward to working with Omar as we accelerate our strategy and continue to deliver value for all our stakeholders.

Omar's remuneration arrangements are consistent with the remuneration policy approved by shareholders at the 2023 AGM. The principal elements are as follows:

• - An annual base salary of £1,000,000;

• - An annual cash allowance of 16% of base salary in lieu of pension; in line with the maximum available company pension contribution for UK employees of a similar age;

• - Participation in Pearson's performance based Annual Incentive Plan (AIP) from 2024, with a maximum annual opportunity of 300% of base salary and a target bonus equal to 50% of the maximum opportunity, prorated to reflect his service during the bonus year;

• - From 2024, participation in the performance-based Pearson Long Term Incentive Plan with an annual face value of 450% of base salary and based on stretching performance targets

  (as set out in this report for 2024);

• - In addition, Pearson will compensate Omar for remuneration he forfeited as a result of resigning from his previous role at Microsoft on a like-for-like basis in accordance with our Remuneration Policy. It will consist of a cash payment in lieu of his forfeited annual bonus expected to be £249,050 covering the 6 months between the end of his prior employer's financial year end and the beginning of his eligibility for Pearson's AIP in 2024; an award of 1,391,718

  Pearson restricted shares which are of equivalent value to the forfeited Microsoft shares and which will vest annually in three equal tranches. This share award has a value of approximately £13.1m based on the three-month average share price and FX leading up to the start of his employment

in January 2024. The Committee acknowledges the relative size of the buy-out award in the context of the UK market, but notes that it is equivalent to the value Omar would have received had he continued in his previous role at Microsoft, which is reflective of the quantum of remuneration packages,

(particularly long-term equity) for global leaders of the calibre of Omar in companies in our key talent markets. Additionally, the restricted share award creates immediate alignment with shareholders and fulfils Omar's shareholding guidelines from the outset.

- Subject to the shareholding guideline under which he is expected to maintain a holding of at least 450% of salary, and to retain that level (or his actual holding if lower) for two years following stepping down as an Executive Director.

Further information on these arrangements can be found on page 112.

Retirement of Andy Bird

Andy Bird announced his intention to retire from the role of Chief

Executive on 20 September 2023. He stepped down as Chief

Executive and as a Pearson Board member on 7 January 2024 and will leave Pearson on 31 March 2024. There was no payment for loss of office. The Committee determined that Andy would be treated as a 'good leaver' in respect of his outstanding awards under the LTIP and treatment of the awards was in accordance with the relevant plan rules. Andy will not receive any LTIP award in respect of 2024, but is eligible for a pro-rated award under the AIP for the period to 31 March 2024, whilst he remains in employment. In line with the Policy, Andy will also be required to meet his shareholding guideline of 450% of base salary for two years following stepping down as an Executive Director. Further details of remuneration arrangements in respect of Andy's retirement can be found on page 123.

Looking forward to 2024

Salaries for 2024

There was no increase to Andy Bird's base salary before his retirement in March 2024. The Committee reviewed the salary of Sally Johnson and approved an increase of 3% bringing her salary to £574,000 for 2024. This increase was in line with the 3% increase for the wider UK workforce. Omar Abbosh's salary remains fixed at £1,000,000 until 2025.

Performance framework

Consistent with prior years, the Committee undertakes an annual review of the performance framework to ensure it continues to align with the forward-looking strategy. Overall, the Committee considered that the performance framework principles remain appropriate, with the only change for 2024 being to move the carbon reduction metric, aligned to Pearson's 2030 carbon reduction goals, from the AIP to the LTIP to reflect the long-term nature of the goal.

Target-setting for 2024

One of Pearson's remuneration principles, which apply across the whole organisation, centres on pay for performance, and this is actively considered by the Committee when determining targets. For 2024, in line with established practice, a robust target-setting process has been followed considering Pearson's strategic plan as well as other relevant factors such as analyst consensus, to reflect market expectations.

The Committee has a strong focus on pay for performance and a robust track record of setting stretching targets, as demonstrated by the targets set in recent years and subsequent incentive outcomes. The approach taken this year is no different.

Disclosure of the 2024 LTIP targets is on page 112. For both EPS and ROC, the stretch of the performance ranges has been increased compared to last year's awards. For maximum vesting, performance must be well in excess of current market guidance, with shareholder returns in the upper quartile against both the FTSE 100 and the S&P 500. As in previous years, we will disclose financial targets for the 2024 AIP in full retrospectively following the end of the performance period.

Remuneration across Pearson

Pearson's remuneration principles are consistent across the organisation and are designed to support our culture, and to make Pearson an employer of choice, able to attract and retain talent to execute our digital-first strategy. Remuneration across the workforce is designed to reflect the role, skills, experience, and performance of any relevant individual as well as local market practice. Many of the features of our Directors' Remuneration Policy apply more broadly, for example, over half of all Pearson employees (c.10,300 employees) participated in the Annual Incentive Plan during 2023 which was funded based on similar performance measures as those used for Executive Directors - andit was pleasing to note that this was funded at the highest level in a number of years, reflecting a strong performance by the Company.

Similarly, all eligible colleagues (including Executive Directors) can participate in savings-related share acquisition programmes that are not subject to any performance conditions. Over 1 in 4 of our employees save to purchase discounted Pearson shares via our employee share plans, thereby becoming potential owners of the business and benefiting from the value they help to create for all Pearson shareholders. It was particularly pleasing that at the most recent maturity of our 'Save For Shares' plan in August 2023 the average gain for a participant was £5,700.

To align with Pearson's diversity, equity and inclusion (DEI)

and global benefits strategies, Pearson expanded healthcare coverage for Pearson colleagues in the UK in 2023 to include more inclusive benefits such as menopause support, fertility and family planning services, and gender affirmation services.

The Committee receives regular updates on talent matters and wider workforce considerations and actively considers the approach to reward throughout the organisation when determining executive remuneration. In addition, the Committee closely reviews relevant pay ratios and pay gaps and supports efforts to make progress against these metrics. In 2023, Pearson published its first

Fair Pay report which contained the gender pay gap and ethnicity pay gap in Great Britain, the latter of which Pearson voluntarily disclosed for the first time. While Pearson currently has initiatives and strategies in place to support competitive, equitable and inclusive pay and benefits, the Company is committed to delivering greater pay transparency in the future.

Pearson is committed to a transparent and positive relationship with all its stakeholders and will continue to engage widely as appropriate going forward. I would like to thank shareholders for their continued support at the 2024 AGM in relation to our 2023 Directors' remuneration report.

Sherry Coutu CBE

Chair of Remuneration Committee

Directors' remuneration report

Pearson's Remuneration Framework - 2023 'At A Glance'

Base salaries (from 1 April 2023)

CEO (Andy Bird) - $1,293,750

CFO - £557,225

2023 annual incentive plan payout (85% of maximum)

Maximum opportunityActual % of maximum

40%

30%

20%

10%

32%

Adjusted operating profitFree cash flow

25%

20% 8%

Sales

Strategic measures

2021 long-term incentive plan payout (85% of maximum)

Maximum opportunityActual % of maximumAdjusted EPS

Final tranche of co-investment award

After Committee assessment of performance underpins (including TSR), it was determined the final tranche would vest in full.

Strategic progress. Sustainable profitable growth.

33%

33%

33%

33%

18%

33%

ROICRelative TSR

Revenue	Adj. operating	Free cash flow	Adjusted EPS	Return on	Dividend per
profit	Capital	share
£3,674m	£573m	£387m	58.2p	10.3%	22.7p
5% underlying growth	31% underlying	74% growth on	12% growth on	+1.6% on	6% increase on
(excl OPM & Strategic	growth on prior year	prior year	prior year	prior year	prior year
Review)

Strategic highlights

• - Acquired PDRI to drive additional growth in our biggest business: Assessments and Qualifications.

• - Delivered a £120m cost savings programme, accelerating group margin expansion to 16%.

• - Launched beta version generative AI tools in Mastering and MyLab.

• - Strong cash performance with free cash flow of £387m and launched a £300m share buyback.

• - Passed milestone of 1m cumulative paid subscriptions for Pearson+.

2023 single figure

CEO$14 032

CFO£2 913

Fixed remunerationLTIP

$000 for CEO; £000 for CFO

AIP

Co-investment Plan

Summary of our Directors' Remuneration Policy

The table below provides a summary of our Directors' Remuneration Policy. The full Directors' Remuneration Policy, as approved at the 2023 AGM, is available on the Governance page of the company's website athttps://plc.pearson.com/sites/pearson-corp/files/pearson/our-company/Governance/governance-downloads/remuneration-policy-2023.pdf

Base salary	-	Base salaries reflect level, role, skills, experience, the competitive market and individual contribution.
-	Base salaries are normally reviewed annually, with any increases normally in line with typical increases awarded to other Group employees.
Allowances and	-	Reflects the local competitive market and may include travel-related, health-related and risk-related benefits as well as any other benefits provided to the majority
benefits	of employees.
-	The Committee may introduce other benefits if it is considered appropriate to do so.
Retirement benefits	-	Employees in the UK, including Executive Directors, are eligible to join the Money Purchase 2003 Section of the Pearson Pension Plan.
-	The Committee has discretion to put in place retirement benefit arrangements in line with local market practice.
-	Executive Directors, who opt out of the pension, can receive a cash allowance of up to 16% of base salary, in line with the maximum company contribution as a
percentage of salary that UK employees of a similar age are eligible to receive.
Annual incentive plan	-	Maximum opportunity of 300% of salary.
-	Based on the achievement of annual business goals and strategic objectives, with financial metrics accounting for at least 75% of total opportunity.
-	Payout of 25% of maximum for threshold performance with 50% payable for on-target performance.
-	Discretion to adjust formulaic outcome where this does not reflect underlying performance.
-	Awards paid fully in cash except where shareholding guidelines have not been met where a bonus deferral applies.
-	Malus and clawback provisions apply.
Long term incentive	-	Maximum opportunity of 450% of base salary.
plan	-	Based on the achievement of financial targets (e.g., earnings per share and a return measure), shareholder returns (e.g., relative total shareholder return) and strategic
objectives (e.g., an environmental, social and/or governance measure).
-	Payout of 20% of maximum for threshold performance with 65% payable for on-target performance.
-	Discretion to adjust formulaic outcome where this does not reflect underlying performance.
-	Awards are subject to a post-vesting holding period of two years.
-	Malus and clawback provisions apply.
Shareholding	-	Current in-employment guidelines of:
guidelines
- 450% for the Chief Executive
- 300% for the Chief Financial Officer
-	Post-employment shareholding guidelines apply.
Chair and NED fees	-	To attract and retain high-calibre individuals, with appropriate or industry-relevant skills, by offering market-competitive fee levels.
-	The Chair and Deputy Chair are paid a single fee for all responsibilities.
-	The Non-Executive Directors are paid a basic fee, with Committee Chairs, members of the main Board Committees, and, if relevant, the Senior Independent Director
paid an additional fee to reflect their extra responsibilities.
-	The Chair, Deputy Chair, and Non-Executive Directors receive no other pay or benefits, except for reimbursement of expenses and do not participate in incentive plans.
-	A minimum of 25% of the Chair, Deputy Chair, and Non-Executive Directors' basic fee is paid in shares.

Implementation of the remuneration policy in 2024 - At a Glance

Base salaryAllowances and benefitsRetirement benefits

Travel, health and risk benefits

16% of salary in lieu of pension

Annual incentive planLong-term incentive plan

Target/ maximum opportunity

(% of salary)

Performance condition Deferral if shareholding guidelines not metGrant (% of salary)

Performance condition Vesting

Shareholding % of salary guidelines

See table overleafOne-third into shares for two years

See table overleafThree-year performance conditions, with two year post-vesting holding period

Omar	Sally
Abbosh	Johnson
CEO	CFO
£1,000,000	£574,000

Provide employment benefits to ensure overall package is market competitive to attract and retain high calibre talent.

Provide competitive retirement benefits to ensure overall package is market competitive to attract and retain high calibre talent.

150%/300%

450%

450%	300%
450% for two	300% for two
years	years

Post- employment shareholding guidelines

Purpose and link to strategy

Recognise market value of role and individual's skills, experience and performance to ensure the business can attract and retain talent.

100%/200%Drive and reward annual performance on both financial and non-financial metrics in order to deliver sustainable growth in shareholder value.

Deferral into shares if shareholding guidelines are not met increases alignment with long-term shareholder interests.

300%Direct financial measures that drive our financial ambitions for the Company and measures linked to our key long-term strategic priorities aligned to the long- term interests of our shareholders.

Provide long-term alignment with shareholder interests.

Provides continuing alignment with shareholder interests following the end of an Executive

Directors' tenure.

Performance measures and targets for 2024

Annual incentive plan performance measures are outlined below. As in previous years, we will apply a financial underpin to the strategic measures. We will disclose financial targets in full retrospectively following the end of the performance period.

Adjusted operating profit

Sales

40%Invest in diverse pipeline and increase BIPOC/BAME representation at all manager levels

30%

Free cash flow

20%

WeightingStrategic measuresThreshold

2% increase in representation of BIPOC/

10%

BAME employees at Manager level and above + maintain overall gender parity as an underpin

5% increase in representation of BIPOC/BAME employees at Manager level and above

Target

10% increase in representation of BIPOC/BAME employees at Manager level and above

Long-term incentive plan performance measures and targets for 2024 are as follows:Adjusted EPS

Return on Capital Relative TSR

ESG - Gender

DiversityESG - Carbon reduction

% of total

Threshold

30% 30% 30%

63p 10.3%

Maximum threshold

82p

13%

5%

Median Improve gender representation at leadership levels overall vs 2023 (VP and above)

Achieve gender parity at leadership

levels in aggregate 100%

(VP and above)

Upper quartile

5% 4% reduction vs 2023 13% reduction vs 2023

Note 1: Vesting is on a straight-line basis between Threshold and Maximum Note 2: 2024 LTIP targets have been set at an USD:GBP exchange rate of 1.27.

10%

Maximum

Payout atPayout at maximum

20% 100%

20% 100%

20% 100%

20%

20%

100%

Note 3: Relative TSR will be assessed half against the FTSE100 and half against the S&P500, Companies within financial services, energy, basic materials, utilities and healthcare sectors will be excluded from both TSR groups.

Note 4: The carbon reduction targets are based on the long-term trajectory required to meet (Threshold) or substantially exceed (Maximum) our 2030 carbon reduction ambitions. Performance will be measured from a baseline of 2023, therefore requiring incremental performance to that delivered to date.

Alignment of performance framework to Pearson's strategy

Sustainable profitable growth 1 Total shareholder return (TSR) Revenue: Mid-single digit (three-year CAGR 2022-2025) Adjusted operating margins (2025): 16-17% 2 3 4 Sales Adjusted EPS Adjusted Operating ProfitFree Cash Flow conversion (2024): 95-100% 5 Free Cash FlowReturn on capital 6 Return on Capital Digital sales: Drive digital revenue growth 1 Sales Consumer engagement: Create engaging and personalised customer experiences 2 Sales Product effectiveness: Improve the effectiveness of our products to deliver better outcomes 3 Sales Culture of engagement and inclusion: Build an inclusive culture and increase diverse representation 4 Various KPIs including diversity and employee engagement Sustainability strategy: Achieve 50% reduction in absolute Scope 1,2 & 3 carbon emissions by 2030 5 Reduction in tCO2	2024 AIP	2024 LTIP

Strategicobjectives

Financialobjectives

Directors' remuneration report continued

Remuneration principles

Pearson's remuneration principles govern pay for the whole organisation. We have developed remuneration arrangements for our Executive Directors with these principles in mind.

1	2	3	4	5	6
Aligned to longer-term	Pay for performance	Market competitive	Targeted differentiation	Tailored	One part of the employee
strategy	value proposition
Reward is linked to achieving	Remuneration framework	Pay levels are market	We operate targeted	Our approach to reward is tailored	Remuneration is one part of
Pearson's longer-term strategy,	and outcomes are aligned	competitive, based on role,	differentiation of reward across	in certain circumstances to	our broader employee value
growth, and sustainability	with performance	grade, and contribution, and	our employees, linked to talent	address a specific market/business	proposition - and not the only
ensure individuals are fairly	and performance management	need, and is consistent with our	reason to work for Pearson
rewarded in line with the market	underlying reward philosophy

Our Directors' Remuneration Policy and its implementation supports our Company purpose of adding life to a lifetime of learning, our strategy and ultimately the delivery of long-term sustainable value for all stakeholders, including our shareholders.

In developing the Directors' Remuneration Policy, the Committee had due regard to the principles outlined within the UK

Corporate Governance Code.

- Pearson's remuneration principles, as set out above, align with our culture and position us as an employer of choice, so we can continue to attract and retain the right talent, and support our digital future. We recognise that remuneration is only one part of Pearson's employee value proposition

-

Our executive remuneration framework is designed to be simple, with total remuneration made up of fixed and performance-linked elements, supporting different strategic objectives

- Our remuneration framework and outcomes are designed to be aligned with performance:

• - Selected performance measures for the AIP (Annual Incentive Plan) and LTIP (Long Term Incentive Plan) are key to achieving the Group's strategic objectives. The

  Committee reviews performance measures annually to ensure they incentivise appropriate management behaviours and goals

• - The Committee carries out a robust target-setting process each year, considering Pearson's strategic plan, as well as analyst consensus to reflect market expectations. This results in stretching, yet achievable, AIP and LTIP targets

• - Maximum awards under the AIP and LTIP are capped and clearly disclosed in our Directors' Remuneration Policy alongside predictions of how the Directors' Remuneration Policy may apply in various performance scenarios

• - When determining pay-outs, the Committee considerswhether the outcome reflects overall company performance and the experience of stakeholders over the period, including shareholders and colleagues. If not, it has the discretion to adjust outcomes

• - The Committee is mindful of reputational and other risks when implementing the Directors' Remuneration Policy and determining outcomes for Executive Directors and senior management. Pearson has safeguards in place, such as malus and clawback provisions and a two-year LTIP holding period, as well as robust shareholding guidelines, which extend post-employment.

• - Before signing off the Directors' Remuneration Report, the Committee reviews drafts and inputs to clarify our disclosures. The Committee engaged extensively with shareholders on the current Directors' Remuneration Policy to ensure they fully understood the rationale for change, and to give them the opportunity to feed into the decision-making process and inform final conclusions.

Discretion framework

When determining performance outcomes, the Remuneration Committee has the ability to adjust payments up or down if it believes that the outcome does not reflect underlying financial or non-financial performance or if such other exceptional factors warrant doing so. In making this determination the Remuneration Committee applies the following framework.

Market context for remuneration at Pearson

Pearson has more US exposure than almost all of the UK market with c.70% of revenues from the US.

Proportion of Revenue from US geographic segment (FTSE 100)

80%

70%

60%

50%

40%

30%

20%

10%

0%

FTSE 100 (excl. Pearson and Inv. Trusts)

Pearson

Based on the publicly disclosed geographic revenue segment which covers the US or Americas as a proportion of disclosed Group revenue. Data for Pearson are based on the year ending 31 December 2023. Data is shown for the FTSE 100 excluding investment trusts, and were sourced from Datastream and published annual reports as at

January 2024.

Additionally, more than half of Pearson's employees are based in the US and two-thirds of the Pearson Executive Management (PEM) are also based in the US, with several joining us from US-based companies.

Data as of 31 December 2023

Market reference points

Given that Pearson is a UK-listed company, but has significant operations in the US and draws significantly on talent from the US, the Remuneration Committee considered remuneration levels at comparable companies in both the UK and US when determining the 2023 Directors' Remuneration Policy and its implementation. The Committee also considers remuneration levels at both public and privately-owned or held companies, but notes that market data for private companies is more limited. The approach to market data was to consider multiple different reference points, including those described below, to provide a rounded view of overall positioning against the market. This approach has evolved over time in line with Pearson's strategic evolution to appropriately reflect the different global talent needed for Pearson's growth ambitions and execution of our digital-first strategy. The Committee has not sought to follow any specific market reference and is mindful of the balance between needing to ensure remuneration packages are sufficiently attractive in the US, a primary and fiercely competitive talent market, and maintaining a UK market-aligned remuneration framework.

- Executive Director remuneration in

UK-listed companies of a similar market capitalisation to Pearson, the FTSE 41 to

100. This comparator group recognises

Pearson's London listing, the fact that Pearson is a member of the FTSE 100, and that UK investors and proxy agencies would likely consider competitiveness of remuneration levels at Pearson in this context primarily. Market data for the

FTSE 100 as a whole was also considered as an additional reference point given the growth in Pearson's market capitalisation in recent years.

- Executive Director remuneration in

US-listed companies of a broadly similar financial size and in a similar sector to Pearson. This comparator group included companies in the broadcasting, interactive media and software sector with similar revenue to Pearson. It considers what Executive Directors are paid in broadly similar US-listed companies, although it does not directly align to Pearson's talent market.

All employees

52%

19%

29%

Directors and aboveExecutives

59%

21%

20%

67%

17%

17%

USUKRest of World

- Remuneration in US-listed companies more closely aligned to Pearson's talent market and strategic ambitions. This comparator group comprised US technology, communications, and consumer discretionary companies, in particular those that are at the forefront of transformative, innovative plays within technology and digital, based on the Nasdaq-100 Index. Recognising, however, that many of these companies were materially larger than Pearson in terms of financial size, rather than considering remuneration levels for the CEO role, the market data considered was for roles reporting into the CEO (primarily heads of business units or Chief Executives of subsidiary businesses) which is analogous to Omar Abbosh and Andy Bird's previous executive roles. This data was only considered in respect of the CEO role at Pearson.

The Committee is mindful of the views of many investors in relation to setting executive pay solely based on market data as well as views on using international peer groups. The Committee therefore wanted to take a balanced and thoughtful approach which incorporates the views of all key stakeholders.

Directors' Remuneration Report continued

Pay positioning

Overall, the intention of the Committee was to ensure a package for the Chief Executive which was competitive considering Pearson's primary talent market. While it is acknowledged the package for the Chief Executive is towards the top end of market practice from a UK perspective, it is within the broad range of pay received by executives below CEO level at relevant US-listed companies.

Chief Executive Officer

Chief Financial Officer

UK positioning

US positioning

UK positioning

US positioning

Salary

Towards the top end of UK practiceWithin US market competitive range for CEO roles

Within UK market competitive rangeWithin US market competitive rangeFor CEO roles, the market data illustrated that annual bonus opportunity levels in the US were around double opportunity levels in the UK. The same picture is not however true for other executive roles, where annual bonus opportunity in the US is more closely aligned to, although still marginally higher than, UK levels.

Annual bonus opportunity

Towards the top end of UK practiceWithin US market competitive rangeWithin UK market competitive rangeWithin US market competitive rangeLong-term incentive opportunity is the key driver in the difference between UK and US remuneration levels. Opportunity levels in the US are many multiples of UK levels. For CEO roles in US-listed companies in a similar sector and of a similar financial size to Pearson, many receive long-term incentives with a target opportunity greater than 1000% of salary.

LTIP opportunity

Substantially belowTowards the top end of UK practice

Towards the top end of UK practice

Substantially below US levels

US levels

Conclusions

The market data highlighted the stark difference in pay practices between the UK and US, and the Remuneration Committee applied careful judgement when considering how remuneration at Pearson should be positioned taking into account the various reference points as well as the views of shareholders.

The Committee determined, with input from shareholders, that the incentive framework at Pearson for Executive Directors should continue to align to typical UK practice, and as such incentives remain fully performance-linked, which is not typically the case in the US market where often a significant proportion of the long-term equity award is delivered in restricted stock with no performance conditions and over shorter time horizons. In addition, annual bonus deferral and additional holding periods on LTIP awards are uncommon in the US market.

Overall, while it is acknowledged that the 2023 Directors' remuneration policy positions Pearson towards the top-end of the UK market, the Committee has not sought to match US quantum levels or market practice in terms of incentive design or the overall remuneration framework.

That the approach taken in the 2023 Policy is necessary for remaining competitive in the global talent market was reaffirmed by the Board's appointment of Omar Abbosh as the Company's new Chief Executive Officer. Omar is a highly regarded global leader with over 30 years of experience in enterprise technology and joined Pearson from Microsoft, one of the world's largest multinational technology companies.