Group Money Purchase
Unlike Final Salary Schemes, Money Purchase Schemes do not give any guarantees with regard to the level of pension income as they do not provide a pension that is linked to a member's earnings. Instead contributions are made by the employer and very often the employee, which are invested in the scheme for the members retirement. The eventual pension is therefore dependent on how much is paid in, the investment returns, the charges, the period of investment,the style of annuity taken and the cost of the annuity.
Trustees control the scheme, but the assets are invested in the members name and usually kept separate from other members funds. Whilst investment decisions are controlled by the trustees, the members can often choose how their fund is invested.
As with Group Personal Pensions charges are made by the administrators against the investments for insured schemes in the form of annual management charges and/or policy fees, although other administrators would charge administration fees or the scheme might be administered in-house (both possibly with investment fee savings).
It is essential that the employer and trustees consider the costs of the scheme very carefully and regularly reviews the factors that led to the original decisions. Such reviews may include:
- Is a Money Purchase Scheme still appropriate?
- If in-house, outsourced or insured is this still the most effective and cost efficient method?
- Are the investments offered or used still suitable, performing as expected or in comparison with peer funds and cost effective?
- Is lifestyling used for members funds?
- Does the scheme need the assistance of an Independent Trustee?
- Are the benefits communicated effectively so that the membership appreciate and understand them?
With these and many more relevant questions and answers we can assist you, contact us.