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Employer Personal Pension Schemes

Employer personal pension schemes: an alternative to occupational pensions?

An employer personal pension scheme is usually offered in place of an occupational pension scheme.This will normally be a stakeholder pension or alternative personal pension.

Currently, an employer must offer access to an occupational, personal or stakeholder pension scheme if both the following apply:

  • Employees earn more than the National Insurance lower earnings limit.
  • Employees number at five or more.

An employer must allow you to pay into your stakeholder pension directly from your wages through the company's pay system.

Laws being phased in from 2012 onwards mean that this is set to change. Between 2012 and 2017 all employers will be required to offer eligible employees a suitable pension scheme. From this time on, pension schemes must meet new minimum standards set by the government, and by 2017 all employers must comply and offer the equivalent of 3% of pensionable earnings towards an employee pension fund.

Your employer may arrange for a pension provider to set up a personal pension arrangement through the workplace. A personal pension (including a stakeholder pension) arranged in this way is called a 'Group Personal Pension Plan' (GPPP).

Although they are sometimes referred to as company pensions, they are not run by employers and should not be confused with occupational pensions. A GPPP is a type of personal pension where your employer chooses the financial provider on your behalf.

Some advantages of contributing to a GPPP arranged by your employer:

  • Your employer will normally contribute to your pension and if the GPPP is offered as an alternative to a stakeholder pension your employer must contribute an amount equal to at least 3 per cent of your basic salary.
  • If your employer has contributed to your pension and you leave your employment you do not lose the money they have contributed.
  • Your employer will normally deduct your contributions from your pay and send them to your pension provider.
  • A GPPP is negotiated with the pension provider on behalf of a group of people and your employer may be able to negotiate better terms than you would get individually, for instance, they may negotiate reduced administration costs.
  • You will usually be able to continue making contributions to your pension if you change employers.

For fully up-to-date advice on current pension rules and to find out more about employer personal pension schemes, speak to a member of the independent company pension advice team at one of our partner firms. Get a free no obligation initial consultation.

Expert Company Pension Advice

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