PENSIONS – Company/Group Schemes

DESIGNED TO SUIT YOUR COMPANY

What is a Group Personal Pension?
Put simply, a group personal pension is a type of pension plan offered by your company but which is in the names of your employees. You and your employees can make payments into the pension plan. These payments build up a fund, which provides your employees with an income on retirement. A group personal pension is just a way of making personal pensions more cost effective and easier to run.

Why should I consider setting up a Group Personal Pension plan for my employees?
If your business employs five or more staff and does not already provide them with the opportunity to join a suitable pension plan, you are required by law to provide access to a Stakeholder Pension or suitable alternative plan group personal pension plan. Broadly speaking you may not have to choose a stakeholder pension plan if you provide an occupational pension plan that both full and part-time employees can join within their first 12 months of joining your company and/or, you offer a group personal pension plan to Full and part-time employees; you pay at least 3% of the employees 'basic pay to the plan; and there are no exit charges on that plan. Employer's payments can be conditional on the employee paying a specified amount. The Occupational Pensions Regulatory Authority can impose financial penalties if you fail to offer your employees access to a stakeholder pension or suitable alternative.

What advantages will a Group Personal Pension offer my company?
One of the key factors for a successful organisation, large or small, is its people. But attracting and keeping quality staff is not always easy. Today's employment market is more dynamic than ever and the idea of a "job for life" has become a thing of the past. So, how do you make your company stand out from all the others when the job offers are on the table? One way is by providing your staff with a valuable benefits package. It's often these added extras which make all the difference to prospective employees. One of the main features of your package ought to be pension provision for your employees. With the government actively encouraging individuals to make pension provision, a good Employer-sponsored plan is a benefit, which your employees will value highly.

Do Group Personal Pensions offer any tax benefits?
Group personal pensions are tax-efficient for employers. Payments made by you are fully deductible as a business expense and there are no National Insurance contributions to make on your payments. What's more, your employees benefit from tax concessions too: All payments made into the plan by your employees will receive basic rate tax relief. Under the present tax arrangements, for each £1 they pay into the plan, the Inland Revenue will pay an extra 28p into the plan, even if they don't normally pay income tax.

If the employee is a higher rate taxpayer, they will need to claim any extra relief through their self-assessment tax return each year. Another tax benefit is that their pension fund will grow free of most UK taxes. The pension fund does not pay tax on any increase in the value of the investments. Neither does it pay tax on the income it receives from the investments (although it is unable to claim back the tax already deducted from the dividends earned on UK shares). With this freedom from tax, money in a pension fund should grow much faster than in most other forms of investment. If your employees take a cash lump sum when they retire (of up to 25%of their fund),it's currently tax-free. Your employee's pensions will be treated as earned income, and as such will be taxable.

Which Group Personal Pension plan should I select?
Our method of selection will be dependant on the requirements of you and your staff, however one important aspect is to make the administration as easy for you as possible, through the use of advanced technology. We will publicise the plan to your employees to encourage take-up The use of e-commerce services provide high quality information and education on group personal pensions. Your employee's benefit as well with the flexibility, of our selected schemes, Employees may stop, start or vary their payments at any time without penalty. Even if your employees change jobs, they can usually keep paying into their Personal pension.

Can I have help setting up the plan?
We can provide employers with help with: Providing a payroll deduction facility. An installation person can be appointed to your company to help manage the setting-up Process. Providing your employees with information about the plan. We can work with you to provide further information through posters, leaflets and information packs.

What will this cost my company?
Apart from the cost of setting up the plan and the small amount of administration you need to do, you will be pleased to know that it won't actually cost you a penny except, of course, if you decide to pay into the plan You can simply decide to set up the plan and not make any payments into it yourself.

What flexibility can a scheme offer my employees?
Employees can pay fixed payments or if payments are deducted from their salary, they can choose to pay a percentage of their earnings. Employees can also invest single amounts as one-off payments whenever they choose, subject to the payment limits mentioned later on. Your employees can stop, start or vary their payments at any time.

What will the plan provide for my employees?
The main benefit of the plan is that your employees have the opportunity to build up a fund they can use later to buy a regular income (an annuity) when they come to retire. And their savings benefit from tax concessions as we explained earlier. However, there are also has additional features that can help your employees make the most of their investment and their retirement. Employees can normally start taking their pension at any time from age 50 (55 from 2010) to 75. They do not even need to retire from work, nor do they have to use their entire fund at the same time. Your employees choose the age that they would like to start taking their pension benefits. A number of options are available to your employees when they start taking their Pension benefits. Your employees can buy their pension annuity from any company through the provision called an 'Open Market Option' and use their fund to purchase an annuity with another provider. Employees can use their plan to provide some or all of the following benefits: A regular income (or annuity). A tax-free lump sum of up to 25%of their fund. A pension for their partner or dependants in the event of death these and any other options will be explained fully to your employees when they come to take their benefits.

Next April 2006 new pension legislation comes into force, you should review any existing company pensions now, and our pension experts are able to advise any changes that may be relevant.

To talk to one of our advisors, call 0800 3893345 or email info@city-financial.co.uk