Group Personal Pensions (GPPs)
These are personal pension plans that are grouped together by one provider for the benefit of the employees of a particular company. They operate under the exact same rules and in the same way as any other personal pension plan.
What distinguishes a GPP from an individual personal pension plan (PPP) is that the charges levied by the provider under the GPP may be lower than under the equivalent PPP. The provider, because they are dealing with bulk business, may be able to offer a reduction in their normal charges.
Charges are one of the important factors in deciding the relevant merits of the products of different providers. The more that is spent on charges, the less will be available at retirement.
- Is a GPP better than a stakeholder scheme?
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The charges under a Stakeholder scheme are capped by legislation and cannot be increased above that cap. The cap is 1.5% of fund value for each of the first 10 years of membership and 1% each year thereafter. Even if the charges on a GPPP initially are as low as this, there is nothing to stop the provider increasing these at a later date. Another essential difference lies in the treatment of your fund should you want to stop future contributions altogether or just suspend them on a temporary basis. In either of these situations, a GPPP provider is able to make a one-off or continuing charge. The effect of these charges can, over time, reduce the accumulated contributions to nil. Under a Stakeholder scheme, one-off charges are not permitted and the only ongoing charge allowed is the normal annual amount referred to above. Finally, if you wanted to transfer your money to another scheme or provider, many GPPP providers charge a one-off penalty. No such charge can be made by a Stakeholder scheme. The full fund value must be transferred.
- What happens if my employer does not pay over contributions?
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It would be normal for the employer running such a scheme to deduct employees contributions from member's pay and remit these directly to the provider. Contributions deducted from pay by the employer must be received by the plan provider within 19 days of the end of the month in which they were deducted from pay. If the employer fails to make payment by the due date, the provider should report this failure to the Pensions Regulator and to the employees if the contributions are still unpaid 90 days after the due date (unless it is a one-off or infrequent error, which is discovered after the 90 days, and which is corrected when found or is thereafter corrected as soon as practicable). If the company is also contributing to the scheme, it must produce a schedule as to when its contributions will be paid. If it fails to make payment by the due date detailed on the schedule of contributions, the same rules apply as for late payment of the employee's contributions. The company would be expected to make good any loss of investment return due to late payment of either employer or employee contributions. If the company fails to do this and the loss is significant, then an employee should first take the matter up with the company and if that fails to produce a satisfactory solution, then the Pensions Advisory Service can be asked to intervene to negotiate a resolution.
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