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workplace pensions

Workplace Pensions

What is it

A workplace pension is a savings scheme for retirement organised through an employer for the benefit of its employees. The employer may have their own scheme, offer one from a specialist pension provider, or use a government backed scheme like NEST.

Broadly speaking, the workplace pension schemes can be categorised as follows:

Employer trust - this is established by employer to provide benefits for employees. It is managed by the trustees, who would hold assets of the scheme and pay any pensions and lump sum benefits. Nowadays, employer trusts are not very common because of higher involvement by the employer.

Master trust - a master trust is an arrangement where a product provider manages pension fund assets for a group of unrelated employers under a single trust arrangement. Master trust gives employers the reassurance that scheme governance requirements will be met without the responsibility of running a trust-based scheme. NEST is an example of master trust.

Group personal pension - this is a contract-based pension scheme. Contract-based pension schemes are individual contracts between the member and the pension provider. The provider establishes the personal pension under a deed poll. The provider is the scheme administrator and there are no trustees. In practice, the board resolution or deed poll will refer to a trust deed and rules. The trust deed and rules will appoint the trustees or the scheme administrator as having the discretion, so death benefits will normally be exempt from inheritance tax.

 A summary of the schemes is as follows:

 

Employer trust

Master trust

Group personal pension

Trustees(s)

Yes

Yes (but independent, no member nominated trusts)

No

Minimum employer involvement

No

Yes

Yes

Higher rate tax relief at source

Yes

Yes

No

Transfers in/out

Yes

Yes

Yes

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