A recent survey by the Association of Consulting Actuaries has revealed that Group Personal Pensions are now the favourite type of pension provision with companies employing upto 250 staff.
The survey also showed that all but 10% of companies employing upto 250 people had reviewed their pension offerings over the last 2 years. According to the AoCA, almost 45% of employers offer a Group Personal Pension to their employees alongside another pension offering. 25% only offer a Group Personal Pension.
Group Personal Pension Plans are pensions in your own name that build up in value, depending how much is paid in, how much investment growth you receive, less the charges taken by the pension company to run it for you. These pensions are far more flexible than others but you personally take all of the risk, meaning your pension value can fall or rise.
Our View
As costs need to be cut, pensions on offer from companies also need to be reviewed.
Pensions linked to employees' earnings are very expensive for an employer to run especially when stock markets and investment returns in general are not good. This puts more pressure on the employer to increase contributions, as he or she takes all of the investment risk.
Because of these pressures, many employers are moving away to pensions not linked to earnings, such as Group Personal Pensions. This eases the pressure and means the employer knows the costs of running the pension scheme.
If you are offered a choice when joining a pension scheme, always take advice. Some pensions are most definitely better than others are. Likewise, if you already have a pension and you are offered one by your employer, think carefully before turning down the offer.
If your employer offers you a free pension contribution for joining the scheme, you could be better off leaving your own pension, in favour of your employers. The majority of employers do not pay into pensions for their employees. Therefore, if you are offered a contribution, you should most probably take it.