Updated: December 16, 2019

Group Personal Pensions

Are you an employee and have the chance to join a group personal pension plan at work? This in-depth guide will give you all the information you need.

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: December 16, 2019

You’re working hard to save for your retirement, but how do you know if your pension is working for you? If you’re an employee it’s likely you’ll have the option to enroll into a workplace group personal pension (GPP). But you may be wondering how it works and whether it’s really your top option for retirement savings.

What is a group personal pension?

Group personal pensions (GPPs) are a type of defined contribution pension offered by employers. Members can use the group scheme to build up their own pension pot and then take it out as retirement income. These schemes are a collection of individual pension plans offered by an employer as part of a collective pension scheme.

In most cases, as an employee, you’ll be automatically enrolled into a group pension plan. And when you save for your future by paying into it, so will your employer. If you don’t know which scheme your employer has chosen, you can find out by asking about the setup, structure, and provider of the group personal pension.

It’s important to know your savings are wisely invested and protected, even if you’re not actively involved in decisions about your pension savings.

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How does a group personal pension plan work?

The employer will choose a pension provider to manage the group personal pension it offers. If you choose to opt into the scheme, the pension contract would be between you and the provider.

Both you and your employer contribute to the pension, and your pot will build further through investment returns and tax relief.

For example, if you pay £100 into your pension every month, your employer matches this with £100, and tax relief will add another £40 to your pot. So your pension will receive a total monthly boost of £240.

Where are the funds invested?

The group pension scheme provider will invest the funds in stocks, shares, and other investments. Many group personal pensions have a default investment strategy for those who don’t want to choose their own investment options.

There are also options for a more personalised investment strategy for people who want active involvement in where and how funds are invested. Whichever risk profile you choose, the value of your investments will fluctuate depending on how the funds perform.

If you’re unsure of which investment risk profile would suit you or whether a group personal pension is the best option for you, speaking to a financial advisor can help.

Make an enquiry with us and we’ll connect you to one of the independent pensions experts we work with. They’ll be happy to answer all your questions and ensure you’re saving into the right pension arrangement to provide the right level of funds for your future retirement plan.

Tax Relief on pension contributions

Like any personal pension, you’re entitled to tax relief on your contributions. For every £80 you contribute, £20 will be added. Your pension scheme provider will claim this for you at the basic tax rate, or 20%, of your total GPP pension contributions and add this to your pension pot. Higher rate taxpayers can claim additional tax relief through their tax return.

GPP versus stakeholder pension

Stakeholder pensions were introduced to encourage more long-term retirement savings, especially for those on more moderate earnings. They include a cap on charges and offer low and flexible minimum contributions.

Employers with more than five employees could offer access to a stakeholder pension scheme or a suitable alternative pension plan.

The minimum contribution for a stakeholder pension is just £20, but in a group personal pension the  minimum contribution is likely to be higher and will be set out by the pension provider.

Another difference is that stakeholder pensions often offer a smaller range of investment options compared to the range available in a personal pension.

The pension scheme that’s best for you will be the one that best matches your financial situation, retirement saving goals, and investment risk profile.

If you’re unsure about your choice, get in touch and we’ll introduce you to one of the independent experts we work with. They’ll be happy to work with you to ensure you’re making your money work harder for you.

Occupational pension versus group personal pension

An employer can only set up an occupational pension scheme under trust, but a GPP, or defined contribution personal pension, can be arranged by an employer or an individual.

In an occupational pension scheme, the employer’s contribution is mandatory, but with a group personal pension scheme the business is usually under no obligation to contribute to their staff’s pension pots.

Another difference is that an occupation pension contract is between the employer and the provider, unlike the GPP where the pension is offered by the employer but the contract is between the provider and pension holder.

Group personal pension providers

Group personal pension providers are often insurance companies, but there are also some independent providers on the market. All providers and investment managers are regulated by the Financial Conduct Authority (FCA) and need approval to offer pensions.

Some providers will allow employers to tailor personal pension schemes’ packages to specific groups of employees.

Here are some of the key UK pension providers:

  • Aviva
  • PensionBee
  • Interactive investor
  • Hargreaves Down
  • True potential investor
  • AJBell pension

Whether you’re an employer searching for the right provider for your employees, or you want to know about the provider and scheme offered by your employer, we work with expert pension advisors who can help.

Make an enquiry  and we’ll introduce you to one of the independent pensions advisors we work with who will help you understand which provider might be best for your situation.

What are the rules for a GPP scheme?

There aren’t any restrictions on the number of pension schemes you can hold, so even if you have a group personal pension, you could choose to set up another personal pension with a different provider.

However, there are limits to the total amount you can pay into a pension which is the same,  regardless of how many pensions you have.

The annual limit for 2019/20 is 100% of your salary or £40,000 (whichever is lower). This includes the contributions you make and the contributions made by your employer. Should you earn less than £3,600 or have no earnings, your annual pension contribution limit is £3,600 (including a 25% top up).

Many GPP providers allow not only your employer but other people, such as your spouse or partner, to contribute into your pension.

Can I transfer my GPP?

Yes, in most cases, your GPP is flexible and portable. If you change jobs you can transfer your GPP pension into a pension scheme with a new employer. Your group personal pension will generally automatically be converted into a personal pension when you move out of a job. You can keep it as a personal pension, or join your new employer’s scheme.

Whatever your situation, transferring your pension is a huge decision that will have far-reaching financial implications.

Many providers aim to make switching to their scheme straightforward as a way to incentivise potential new customers, but experts recommend getting professional advice from a financial advisor who can quickly compare all your options to find the scheme that will pay you back the most over the long-term and offer terms that match your needs.

We work with independent financial advisors who are experts in advising customers about their pension arrangements. Get in touch for a free, no obligation chat and we’ll connect you with one of the pensions experts we work with.

What are GPP scheme benefits?

A major benefit of a group pension is that they often have lower charges than individual personal pensions. This is because of a group discount that the provider may offer your employer.

While you may also get the added bonus of employer contributions, they aren’t obligated to do so unless the GPP is used as an automatic pension enrollment programme.

As with other personal pensions, GPPs offer the benefit of being both flexible and portable, and even if you stop working or change jobs, you’ll often be able to continue to pay into your pension plan.

Alternatively, you can opt to keep the funds invested in the scheme until it’s time to withdraw your pension.

Group personal pension salary sacrifice

Salary sacrifice is an arrangement between employer and employee. It gives the employee the option of reducing their salary in exchange for an additional pension contribution or other benefit.

In exchange, the employer could pay your total pension contribution.

It’s best to contact your employer if you’d like to find out how you can set up a salary sacrifice arrangement.

The employer would usually have to change the terms of your employee contract, to include the salary sacrifice arrangement.

If your financial situation changes significantly later down the line, you can request to change the contract terms again to increase your immediate earnings.

If you have any questions about whether a salary sacrifice would work for you and you’d like advice from a pensions expert, get in touch with an online enquiry.

How can I contribute or withdraw money from a GPP?

You can choose how much you want to contribute into your personal pension, and if you’d like to make changes to the amount you pay in, this can be agreed with your pension provider.

You can start withdrawing benefits from age 55, or earlier if your health is poor.

You can withdraw up to 25% of your pension as a tax free lump sum and the rest can be used to provide your regular pension income payments.

Defined contribution scheme pensions also give you the option of taking out the remainder of your pension as either a taxable lump sum or as regular income.

How can I calculate my GPP?

Using an online pension calculator, you can get a rough idea of how much your pension will be worth when you retire.

This can help you see how much you need to pay into your pension to fund the lifestyle you want in your retirement.

Remember, these calculators can’t take your entire financial situation into consideration, or give you an accurate  comparison from across the entire market.

If you’d like help calculating how your pension contributions add up, and how to best manage your finances to suit your current and future needs, make a free, no obligation enquiry and we’ll put you through to one of the financial advisors we work with.

Speak to an expert advisor today!

A group personal pension can offer a flexible way to build up retirement savings and benefit from tax advantages. And your employer may offer to top up your pension savings with a contribution, so, by opting out of a GPP, you could lose out on extra pension income.

If you’re considering joining one of these schemes, or you’d like to transfer your pension, give us a call on 0808 189 0463 or make an enquiry.

We work with carefully vetted pension advisors who can advise you on which option would work best for your situation and pay back the highest returns.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Richard Angliss

Richard Angliss

Finance Expert

About the author

Richard Angliss has made a career in financial services which stretches over 40 years.

His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.

For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.

At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.

With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them.  Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.

He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.

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