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What is a Group Personal Pension?

By: J.A.J Aaronson - Updated: 3 May 2016 | comments*Discuss
 
Group Personal Pension Gpp Pension

Group personal pensions (GPPs) are an increasingly popular variety of pension arrangement often favoured by employers that have abandoned the stakeholder pension model. Group personal pensions are a type of money purchase pension, and tax relief is available on GPPs for both basic rate and higher rate taxpayers.

Group personal pensions are normally arranged by an employer, with the fund being administered by a pension manager of your employer’s choice. Regardless of this, a contract exists between you and the pension provider, rather than between the pension provider and your employer. Many employers make contributions to their employees’ group personal pensions; indeed, in many cases employers are legally obliged to do so unless they are offering another pension scheme, to a value of at least 3 per cent of each relevant employee’s salary.

How is a Group Personal Pension Managed?

Group personal pension funds are normally invested in stocks and shares. Your pension fund will often make up part of a larger investment fund. The fund managers’ intention is obviously for the value of the fund to increase over time, but it is important to remember that this is not always the case; indeed, as has been illustrated during the course of the recent pensions crisis, the value of pension funds can often fall. If you are particularly risk averse, you should seriously consider whether a pension of this kind is suitable for you.

This type of pension arrangement is attractive to many because, upon retirement, you will have the option to take a tax-free lump sum. Many retirees use this lump sum to pay off a mortgage or other significant debts. The remaining value of the fund is normally used to buy a lifetime annuity in order to secure an income, although pension holders often have a choice regarding what they do with this money.

How Big is a Group Personal Pension Income?

The size of your pension income will depend on a number of factors. Primary amongst these is the size of the lump sum that you choose to take; obviously, the more you take out at the start, the lower your income will be. Similarly, your income will also depend on the size of your contributions and the annuity rates at the time at which you retire.

Unlike stakeholder pensions, which are explained in another article in this section, fund managers are free to charge entry and exit fees. This means that, if you choose to leave a group personal pension you may incur a penalty. If you start paying into a group personal pension as a result of an occupational arrangement, and subsequently leave your job, it is normally possible to leave the fund to grow in the normal way. Alternatively, you can arrange for it to be transferred into a regular personal pension – but you should check with your fund provider before doing so as they may charge a fee for this.

If your employer is offering to contribute to a group personal pension, you will almost certainly get more for your money than if you were to contribute to another fund on your own. However, you should think carefully about the risk involved in this type of pension fund.

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I had a final salary pension I contributed to until I was made redundant in 1989, in which I was paying SERPS contributions. Upon redundancy, Istarted up my own business and transferred my final salary pension pot into a private pension scheme. The pension company frequently made mistakes and was very poor in providing any sort of written feedback. I got so fed up with them that I saw an Independent Advisor who switched me to another plan which I was very happy with.I have now found out that after four years of receiving a pension, the first pension company I used had contracted me out of SERPS without my knowledge or agreement.When I switched pensions providers, the second one contracted me into SERPS. The result is that I have a full SERPS pension from my Post 97 with my second provider, but I lose £63.83 a week from my PRE 97 pension of £78.28.I have complained to my original pension provider who wrote to tell me that they would answer my complaint in writing by the 2 May.I have heard nothing, I have chased by email for an answer and also received nothing.I reckon the first pension provider has screwed me because there is no proof that I agreed to contract out. What should I do next?
Shot Knees - 3-May-16 @ 7:22 PM
I'm just really confused to be honest. Right, I opted out of serps in 1990/91 whilst at that time on a particularly low salary, i still receive statements from ' the cooperative ' who were introduced to me by the employer at that time and advised ofthis as a good deal - I was young and hadn't a clue . Since then, I had 3 years study in full time education (not paying N Insurance) but importantly gaining qualifications, i then got a good job in 1995 with better pay (paying N Insurance again), but with no private pension scheme until a stakeholders scheme was set up by the employer in 2005, i paid into this until 2009 as did my employer contribute. I got a new job in 2009 until 2010 (paying N Insurance contributions) but then became self employed with no salary for approximately 1 years + (paying nothing/earning nothing). I haven't paid anything in to the stakeholders pension now for 5 years but have a new employer in the public sector which provides the government related pension scheme NILGOSC (which I'm now paying, only because I'm afraid not to). It's a bit of a mess and very disjointed.Will I be facing a lot of complications and left with nothing when I retire . What do I need to do here? Please help ..A
Aidan - 27-Jun-15 @ 3:44 AM
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