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As they are not classed as occupational schemes Group Personal Pensions are not subject to the more onerous rules and regulations applicable to such schemes. They are made up of a series of individual personal pension policies, with each employee having their own policy.
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.
Between 2012 and 2016, employers will have to automatically enroll all eligible employees in a qualifying pension scheme and make contributions to their plan.
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 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.
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 Personal Pension products available to you, please contact the Willis Wealth Management team on 028 9032 9042 or complete our quick enquiry form.