Group Personal Pension

A group personal pension (GPP) plan is a registered pension scheme. It is a collection of individual personal plans grouped together by the pension provider. Personal pensions usually offer a wide choice of funds in which to invest.

Pension providers pass on administration costs through pension plan charges, which are deducted from the employee's fund. Costs can vary considerably and there can be penalties for switching pension provider, so research these carefully before taking a decision. Plans that allow lump sum payments and changes to premiums may give the greatest flexibility.

Where an employer arranges for a pension provider to set up a GPP, employees can expect lower fees than those for individual personal plans, meaning more of their savings go towards their pension.

Personal pension plans may be a good option for employees who change jobs frequently, as they may be able to continue contributing when they change jobs. However, any special terms the employer has arranged for employees, such as lower costs or life insurance, will probably stop when the employee ceases to work for that employer.

Group Money Purchase

In a money-purchase scheme, the final pension amount will depend on the amount of money paid in, the investment performance of the pension fund, the age at which the fund is used to purchase an annuity (the later this is, the higher the annuity payments are likely to be), the level of annuity rates at the time and the ancillary benefits offered (such as spouses' pensions, or annual increases in pensions paid, if any).

Both employers and employees can make payments into such a scheme. However, payments into an occupational money-purchase scheme cease once the employee leaves. With an occupational money-purchase scheme the investment risk moves from the employer - as in final salary schemes - to the employee. The pension will not necessarily be lower, but the risk that the employer will have to find substantial extra sums of money to fund the scheme because of poor investment performance is eliminated.

Occupational money-purchase schemes generally operate by way of a trust. Objectives are set out in the trust deed and day-to-day decisions will be taken by the trustees. Employers still have some key responsibilities, either as employers or as trustees - for example, on the level of employer contribution, or the extent of provision for dependants.

Group Stakeholder Pension

A Group Stakeholder Pension is a collection of Stakeholder Pension Plans arranged by an employer for their employees much in the same manner as Group Personal Pension schemes. However, Stakeholder pensions have to meet certain standards and obey certain rules.

Final Salary Schemes

A final salary pension is another type of occupational pension . The way a final salary pension scheme works is that an employer will guarantee a pension based on the number of years that an individual has worked for the company, and the final salary that at retirement.

For each year of service, a proportion of the individual's final salary is credited as pension up to a maximum of two thirds of final remuneration.

Benefits of a final salary pension

The main benefit of a final salary pension is the fact that the employer provides a guarantee that the pension will be a certain amount, and that the pension will increase at least in line with minimum standards. Employees may be required to contribute, but invariably they will get a good deal with a final salary pension.

However, this is the reason that final salary pension schemes are becoming less popular with employers. Because they must guarantee the pensions of their employees, the final salary pension funds must meet legal solvency criteria. Because shares have not performed well in recent years, many employers have decided that this burden is too great a risk, and have decided to close their existing final salary pension schemes.

We can assist both employers and employees in the best way to either manage an existing final salary scheme or replace/wind up depending on the interests of those involved.