Group Personal Pensions

In 2001, the Government announced ‘Stakeholder’ legislation which was aimed at cutting the charges applied to savings plans and pension plans, and increasing their flexibility, to encourage more people to save for their retirements.

On the pension side, it was decided that companies with 5 or more employees earning at least £90 per week (in 2008/09) had to have some form of pension scheme in place.  The employer didn't have to make any contributions, and there was no compulsion for the employees to sign up - the employer just had to have something in place to offer.  The penalty for not having a scheme to offer is a fine of up to £30,000.

Employers who offer all employees access to a Group Personal Pension Scheme (a collection of individual personal pension plans grouped together by the pension provider) are exempt, providing the employer contributes at least 3 per cent of employees' earnings and the Group Personal Pension Scheme has no exit penalties.

Where an employer arranges for a pension provider to set up a GPP, employees can expect lower fees than those for individual personal plans, meaning more of their savings go towards their pension.

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