Announcement from my Employer (Ceasing occupational for GPPP)

CJ0

Hi all,

My company has sent me an announcement that my current occupational pension scheme has been replaced with a Group Personal Pension Plan provided through 'Standard Life'. They have cited reasons such as the cost and increasing pension legislation as the reasons to why they have done this.
They close the opening statement "Please therefore accept this announcement as formal notification that the scheme will be closing.

I will be asked over the next few weeks to confirm whether I wish to join the plan with effect from April 06.

The Highlight the benefits as follows:

a) Individual ownership
b) Lower Investment charges
c) No penalties
d) Wider range of investments funds
e) Alternative investment options

I currently through my occupational scheme pay 4% of my annual salary which my employer then contributes 8.6% on top. 4% is the minimum I can put in to obtain maximum contributions from my employer which is 8.6%. I have been paying in for nearly 5 years.

Please can someone advise me, to the implications of this change and what benefits or losses I'm likely to receive. Is this a lesser scheme for us the employee whilst the company reap savings ?

Thanks in advance

dunstonh

a) That's just SPIN and not really a benefit.
b) If the old scheme was a final salary one, there were no investment charges. If it was money purchase, then the charges are variable but often lower.
c) Correct.
d) Very likely - most money purchase schemes have a limited fund range when compared to modern personal pensions.
e) Isnt that the same as d)?

If the old scheme was a money purchase occupational pension, then really there is not a significant difference and the changes could be beneficial. If it was a final salary scheme, then no matter how much SPIN they put on it, it is highly unlikey a GPP would beat it.

Assuming money purchase occ scheme, the company will save a bucket load of admin as the insurance company takes over control. If an IFA has been used, a lot of the admin will be passed to them as well. An IFA would be cheaper to the company than a member of staff (or several members of staff potentially).

EdInvestor

I currently through my occupational scheme pay 4% of my annual salary which my employer then contributes 8.6% on top. 4% is the minimum I can put in to obtain maximum contributions from my employer which is 8.6%

Will these contributions remain the same? If so and the existing scheme is money purchase then all you need to ask for is a comparison of the charges you are and will be paying.

Assuming there is not much difference in charges, then arguably you will be in a better position because the scheme will be much more flexible, with probably better investment options. Have they provided a list of those yet?

If the existing scheme is final salary, then any GPP will be much worse as the risk is being transferred from the company to you.

bootman

My huabands work did this a few years ago. To standard life as well . They paid the same in. Some people had problems with the transfer value. The scheme was already with SL but funds still had to be transfered.

The down side for us was the hope of a windfall with SL. The plan that was cancelled was elegable, the new one is not!!!

He has since changed jobs and we have carried on paying ourselves into this plan and the new employer agreed to pay into it as well. So that is good. When you leave a company its not just another frozen pension, it is yours not your companies.

CJ0

Hi all thanks for helpful responses thus far, this is further information as requested. This response has been e mailed to company from MD



Dear All,

I wanted to provide you with advanced notice of our plan to take advantage of a change in the Law from April 2006 by moving our Defined Contribution Pension Scheme from it's current Trustee Based approach to a Group Personal Pension Plan.

The contribution arrangements, i.e. the money going into the scheme, will remain the same, but the administration costs will be lower which means that more of that money will be invested for the growth of your pension fund. This has a cumulative benefit which effectively increases year by year.

In addition, the new arrangement will give you much more flexibility in the future regarding how your funds are invested and accessed, including, for example, the use of Self Invested Personal Pensions.

To help you benefit from this new freedom, We will be utilising the existing Trustees considerable experience to help the company set up the new GPP scheme with Standard Life and to monitor them to ensure that they remain competitive both in absolute investment return and charges. They will also provide clear and regular communication about the scheme.

Many of you will be perfectly happy with the lifestyle approach to investment (the default option), and if so you can just relax, retain this option but enjoy the benefit of a higher rate of growth of your funds due to slightly lower admin charges. For others, you will want to to gradually and carefully examine new ideas for investing your funds, which better fit your plans for the future. The choice will be yours.

HR will be sending you a detailed package to give you more detail. HR will also be arranging presentations during February where you can get questions answered and discuss the matter further.

This is only good news and I hope you will quickly see the advantages for yourself to maximise your pension.

EdInvestor

Sounds fine to me. The flexibility aspect is not to be sniffed at and nor is the lowered costs.

Just make sure you pick good funds.

whiteflag_3

CJ0 wrote:

Hi all thanks for helpful responses thus far, this is further information as requested. This response has been e mailed to company from MD



Dear All,

I wanted to provide you with advanced notice of our plan to take advantage of a change in the Law from April 2006 by moving our Defined Contribution Pension Scheme from it's current Trustee Based approach to a Group Personal Pension Plan.

The contribution arrangements, i.e. the money going into the scheme, will remain the same, but the administration costs will be lower which means that more of that money will be invested for the growth of your pension fund. This has a cumulative benefit which effectively increases year by year.

In addition, the new arrangement will give you much more flexibility in the future regarding how your funds are invested and accessed, including, for example, the use of Self Invested Personal Pensions.

To help you benefit from this new freedom, We will be utilising the existing Trustees considerable experience to help the company set up the new GPP scheme with Standard Life and to monitor them to ensure that they remain competitive both in absolute investment return and charges. They will also provide clear and regular communication about the scheme.

Many of you will be perfectly happy with the lifestyle approach to investment (the default option), and if so you can just relax, retain this option but enjoy the benefit of a higher rate of growth of your funds due to slightly lower admin charges. For others, you will want to to gradually and carefully examine new ideas for investing your funds, which better fit your plans for the future. The choice will be yours.

HR will be sending you a detailed package to give you more detail. HR will also be arranging presentations during February where you can get questions answered and discuss the matter further.

This is only good news and I hope you will quickly see the advantages for yourself to maximise your pension.

CJO

This makes perfect sense for both you and your employer. I dont think you have anything to worry about. Given the new legislation for Occupational schemes any small to medium size business ( or even large ones for that matter) would be mad to contine with a defined contibution occupational scheme.

They are even taking advantage of the Standard Life group Sipp option :cool:

dunstonh

I concur. Nothing wrong with what they are doing and the increased investment options should be the biggest positive point.

whiteflag_3

So we all agree then!

Shockeroony :T

CJ0

thanks to everyone for very helpful advise.

Still only in my mid twenties and trying to get this Pension minefield all clear ! :j