Group Personal Pension Employer FAQs

As covered in our recent article ‘What is a Group Personal Pension?', a Group Personal Pension (GPP) is a type of workplace pension scheme arranged by an employer but set up as a collection of individual personal pension plans for employees.

Unlike an occupational pension (where the scheme is set up and managed by an employer, usually with third party trustees), a GPP is managed by a pension provider which has been selected by the employer for their employees to join.

As administrators and trustees of our own Isle of Man GPP, we thought it would be useful to share some of the FAQs we receive from Isle of Man employers.

Is it compulsory for us to provide a pension to employees?

Currently, the Isle of Man doesn’t have compulsory workplace pensions like the UK has. However, with people living longer and the state pension becoming more expensive to deliver, this may well change. Many countries including the UK, Gibraltar and Guernsey already have what’s commonly referred to as ‘Auto Enrolment’ in place, and Ireland will be introducing this from 1st January next year.

Nevertheless, whilst this is not currently a requirement for Isle of Man employers, the tight labour market in the Isle of Man has meant that more employers are offering pension schemes to ensure their benefit packages remain competitive and attract the best candidates.

How many staff are needed for a group personal pension?

We get asked this a lot, and the true answer is ‘how many staff do you want to include?’ While the average number of staff in the GPPs that we run is around 30, our employers range from having one member of staff to more than 200 employees in the scheme.

How much should an employer contribute. Can it be different for different staff?

The amount the employer contributes is entirely up to them. In our experience, this varies between 3% and 10% (a few even higher). It is also possible to have different payment levels for different staff, perhaps based on role, seniority, age, length of service etc. Some employers match their employees’ contributions - so whatever the employee pays, they effectively double it (usually up to a maximum percentage). In addition, this could be individually negotiated if, for example, an employer was looking to match or exceed an offer made by a competitor for a particular member of staff.

Can employees make extra contributions?

Yes, employees can choose to contribute as much as they want from their salary. In addition to this, they may also choose to make additional contributions as and when they wish, provided they stay within the maximum annual allowance that the Isle of Man tax office imposes (currently £50,000 p.a. across all contribution types, noting that tax relief is only available on the amount up to 100% of their relevant earnings in the year).

Can employees transfer an old pension to a new GPP?

One of the often-overlooked benefits of a GPP is the ability for members to transfer in pension plans that they held with previous employers. This gives the advantage of keeping all pension plans in one place, perhaps also reducing overall costs. From the employer’s perspective, they do not need to get involved as this is handled by the pension provider.

Do employees have to join the GPP? Can they opt-out/pause contributions?

The short answer is no, they don’t have to. However, if an employer is also contributing, this is a very efficient way of saving towards retirement. Depending on the terms of the employee’s contract with the employer, it may be a requirement for the employee to contribute to the GPP in order to benefit from the employer’s contribution, and therefore if an employee opts-out/ceases their contribution after joining the GPP this may result in no future contributions being made by the employer.

What happens when an employee leaves the company?

The pension plan for the former employee remains held in their name and is removed from the “group” structure meaning that no further contributions are made by the employer into the GPP in respect to that individual. Unlike traditional company pension schemes, the employer has no further administration responsibilities in respect to that individual’s pension fund.

The former employee may be able to carry on contributing to their individual pension plan if they wish, and they could also possibly transfer their accrued fund into their new employer’s pension scheme. Alternatively, they could leave the fund until they wish to take benefits.

What are the charges for?

Using Boal & Co’s GPP as an example, we charge a nominal annual percentage fee, agreed at the outset with the employer, which covers the administration of the scheme as well as the costs of Boal & Co acting as trustees.

The fees for the investment funds will vary depending on the funds chosen. These are deducted directly from the fund by the fund manager, often within the fund unit price.

If formal financial, investment or other third-party advice has been taken, any fee for this will usually be deducted from the employee’s pension fund. All advice fees are agreed in advance by the employee.

Do we need an IFA?

As most people are not overly familiar with the details of pensions or investments, we would always recommend taking formal advice from a regulated independent Financial Adviser (IFA). However, should an employer wish to proceed with setting up the GPP without advice, this is possible.

We already provide a pension scheme to our staff, why should we review it?

Many companies have had pension schemes in place for several years, perhaps with numerous past employees already benefiting from their pension funds. However, as with most things, it is always worth reviewing to see if it is still fit for purpose and meeting both your and your employees’ requirements.

The Isle of Man’s pensions landscape has evolved radically over recent years with the introduction of the Pension Freedom Scheme (PFS) enabling people to take their pension fund in whichever way they wish (subject to some restrictions). If you haven’t yet changed your workplace pension scheme to a PFS, it would certainly be worth considering this to ensure you are offering your employees the best possible option.

It’s also worth checking that the scheme remains competitive in terms of costs, service and features. Could you be getting more for less?

Another thing to consider reviewing is the contribution percentage you are offering to your employees. Is it still competitive?

Finally, is the advice you originally took upon establishment of the scheme still available and being used effectively by both you and your employees?

Just a few thoughts that are worth considering perhaps on an annual/bi-annual basis to ensure you are offering your employees the best possible option.

How easy is it…..really?

It really is quite straight forward.

The hardest part of setting up a new GPP is deciding to do it and deciding how much you wish to contribute as an employer.

The rest is simple; we need some information and documents about the employing company (all fairly standard) and a form filled out by each employee joining the pension scheme. (For larger companies we can even have the forms pre-populated so they just need signing!)

Once the paperwork has been done, it’s as simple as arranging the deductions from salary each month, adding your employer contribution and sending over to us. We also need to be kept up to date with any changes in circumstances (for example changes in contribution amounts, leavers, joiners, pauses in contributions etc).

Employees with other pension plans who wish to transfer them to the new scheme can either seek advice from an IFA or contact us and we can provide the relevant forms to the employee – the company does not need to be involved.

How soon can I get started?

Once you’ve provided company due diligence and your employees have completed their application forms, we can be up and running as soon as your next pay day!*

What are my next steps?

Whether you already have a workplace pension scheme and are looking to change it, or you’re starting from scratch, we are very happy to talk through the process with you.

*Depending on timings!