Group personal pensions
Some employers make a personal pension available to their staff through a group arrangement. If your employer offers a group personal pension scheme, you should seriously consider joining it, especially if your employer makes contributions as well.
With a group personal pension deductions are paid from your salary to the provider. Your fund is then invested by the pension provider to give you benefits at retirement, just like other personal pensions.
If you don't join your employer's group personal pension scheme you'll miss out on any contributions your employer may also make, and possible reduction in charges. If you need more information you should check with your employer.
Group stakeholder pension
A group stakeholder pension is a collection of stakeholder plans arranged by an employer for its employees in the same way a group personal pension is.
Read more about stakeholder plans.
Contributions from your employer
In some company pension schemes your employer will normally at least match your contributions. If for example you were to pay in £100 per month (including tax relief), your employer would contribute £100 too.
Matching your contributions in this way will depend on the scheme rules, and if they do match what you pay in, they may only contribute up to a certain percentage of your salary.
But if your company does offer this, it's worth thinking about. By paying into such a pension arrangement through your company you'll be taking advantage of their contributions.
Matching contributions example
For example as a basic rate tax payer if you contributed £80 per month, the tax man would add £20 in tax relief, and your employer would match that by paying £100. Over 20 years your employer could match this and pay £24,000, giving you a pension contributions total of £48,000, or even more.
The example should not be taken as a recommendation. It is for illustration purposes only. It assumes all earnings are taxed at 20% as a basic rate taxpayer. In reality some income would remain untaxed at the basic rate. It also assumes your employer matches your contributions.
The value of your fund may go down as well as up and you may not get back your original contributions.
Other benefits of a group personal pension
- Group personal pensions and group stakeholder pensions offer the same features and tax benefits as an individual personal pensions or stakeholder pensions and offer the same tax benefits.
- One difference though is that your employer may be able to negotiate better terms from the provider, such as lower charges than you might get if you arranged your own personal pension.
- Group personal pensions also often offer a broader range of investments than stakeholder pension schemes.
Even though they are offered through your employer, group personal pensions are personal pension schemes, and this means you have an individual contract directly with the provider.
*This is based on our current understanding, as at 6 April 2010, of current tax legislation and HM Revenue & Customs practice, both of which may change without notice. The impact of taxation (and any tax relief) depends on individual circumstances.
