Insurance Products
- Construction
- Transport
- Professional Risks
- Property Investors
- Private Clients
- Hospitality & Leisure
- General
Financial Services - Personal
- Investment Management
- Family Protection
- Personal Pensions / Contracting Out
- Preparing for Retirement
- Protecting Family Wealth
- Venture Capital Trusts (VCTs)
Financial Services - Business
Products
Group Personal Pension (GPP)
What is a Group Personal Pension?
Group Personal Pension Plans (GPPs) are a relatively straightforward method of providing your employees with a pension arrangement. As they are not classed as occupational schemes they are not subject to the more onerous rules and regulations applicable to such schemes. Group Personal Pensions are made up of a series of individual personal pension policies, with each employee having their own policy.
Contributions
You collect the contributions from your employees and administer the scheme, and contributions benefit from tax relief (at the employee's highest rate). You can choose to make contributions to the scheme, and if your contributions are at least 3% of the employee's basic pay it will meet your obligations under the stakeholder pension regulations and you won't be legally obliged to provide any other pension plan for your employees.
Key Points:
- Contributions to Personal Pensions generate direct tax savings. Contributions are made net of basic rate tax relief, which means that you will only actually contribute £80 net for every £100 of contributions paid. Higher and additional rate taxpayers likewise make contributions net of basic rate tax and can then claim additional relief via their Inspector of Taxes/Self Assessment return.
- A 40% taxpayer therefore only contributes £60 for every £100 of contributions falling within the higher rate band and a 50% taxpayer only contributes £50 for every £100 of contributions falling within the additional rate band (subject to any anti-forestalling restrictions which may apply). These figures assume basic rate tax of 20%, higher rate tax at 40% and additional rate tax at 50% (2010/11).
- Employers' contributions attract Corporation Tax relief
- Pension contributions once made will grow in funds where there is no liability to tax on capital gains and where all forms of investment income (except dividends) are also tax free.
Employer Responsibilities
Between 2012 and 2016, employers will have to automatically enrol all eligible employees in a qualifying pension scheme and make contributions to their plan.
Key points:
- Enrol employees automatically into a qualifying workplace pension scheme
- Register with the regulator how they have fulfilled the enrolment duty
- Allow a genuine opt-out procedure for jobholders and process any resulting refund of contributions correctly
- Make a minimum contribution of 3% of pay to an employee’s pension scheme
What to do now:
Although the legislation is not likely to affect the majority of employers until 2013 and 2014, now is the time to start making preparations for the changes.
There are steps you can take now to minimise this impact, for example
- Increasing the existing qualifying scheme membership over the next few years will help avoid a sudden increase in costs. This also has the advantage that the employer can promote the benefits of joining the pension scheme with a positive message, rather than communicating with staff that they will be auto-enrolled, which could be viewed negatively
- Salary exchange can reduce costs by deducting the employee’s contribution from their salary before tax and National Insurance. This saves on National Insurance contributions for both the employee and employer, allowing a higher contribution to the pension at no extra cost to either
Salary Exchange
Salary Exchange involves employees accepting a reduced salary in exchange for a pension contribution, which is then paid direct to the pension scheme or provider by the employer. Both the employee and the employer benefit from reduced national insurance contributions as well as tax relief at marginal rates.
Salary Exchange Key Advantages:
- Employers pay less in National Insurance contributions
- Increased pension for employees
- Increased take-home pay for employees
- Adding true value to the benefits package
- Greater flexibility
Death Benefit
Death benefits under a personal pension plan or stakeholder scheme are normally paid as a lump sum. Death payments usually consist of the return of the pension fund that has been accumulated together with any life assurance.
The total amount is allowed to be paid out as a lump sum. If the amount paid exceeds the Lifetime Allowance (£1.8 million in tax year 2010/11) the excess is taxed at 55%.
Death benefits do not have to be taken as lump sums. All or part of the lump sum can be used to provide dependents pensions.
If you would like further information on Group Private Medical inusrance products available to you, please contact the Willis Financial Services team on 028 9032 9042 or complete our enquiry form.