There are so many choices when it comes to pension and protection products, all of which will suit different employers and their employees present, former and future. In this insight article we look at the different types of pension schemes and risk products which workplace pension providers offer.
When setting up a new pension scheme, the first choice faced by most employers is which kind of scheme would suit both employer/sponsor and the potential scheme members. Where some employers may find group personal pensions work best for them, others may prefer a group SIPP arrangement or a group stakeholder pension. For some employers, a defined benefits scheme continues to be the right choice for them. In recent years CIMPs (contracted in money purchase schemes) have even made a comeback.
Where employees have existing pension schemes setup, they may also want their employer to pay their contributions into an existing scheme, but not all workplace pension provider benefits platforms can accommodate all forms of pension arrangements.
If a wide choice of potential providers is important, the employer may want to consider a group personal pension scheme or master trust arrangement. A group personal pension arrangement is a form of defined contribution pension but where the pension is an individual contract between member and provider. GPPs and master trusts are the most common type of offering, but they have very different legal structures. A master trust differs in that the scheme is established as a trust, so it is governed by trustees and can be used by two or more different employers.
Group stakeholder pensions work similarly to a group personal pension scheme arrangement which typically have lower annual charges. They used to be the most common form of workplace pension scheme but have become less popular in recent years. Because of the low fees and ability to access at an early age, should an employee have an existing stakeholder pension they may ask their new employer to pay their contributions into their existing stakeholder pension.
Another type of scheme arrangement employers and their advisers may be looking to accommodate within a workplace pension provider’s benefits platform is a CIMP, a form of occupational pension scheme where there is no direct relationship between members and the provider.
Contracted in money purchase (CIMP) schemes were considered out of fashion at the end of the last century as the more simple group personal pension arrangements gained in popularity. However, as increasingly large numbers of employers closed their defined benefit schemes of the last twenty years, CIMP arrangements have regained their popularity.
Another form of scheme arrangement especially popular with smaller employers or for senior management/leadership teams is a group SIPP arrangement, otherwise known as a workplace SIPP. Under this arrangement, a number of employees join the same SIPP scheme chosen by their employer and the individual SIPPs are held together in a group. Whilst under this arrangement the pensions are part of a workplace group, allowing for contributions and payroll deductions from your employer, the pension investment is an individual contract between member and providers.
The graph below shows which providers are offering each type of pension arrangement.
Another major choice faced by employers and advisers when setting up a new scheme or changing providers is to consider what additional risk products they would like to make available to members, and whether these are to be offered via a different provider.
Group protection schemes can be a very attractive benefit to employees. Our data shows that group protection plans are only offered by Aviva and Legal & General. Aviva currently offer group death in service cover, group private medical insurance, group income protection, group critical illness, group personal accident and group travel insurance. All cover offered by these policies can also be increased by the member and the policies can be extended to be joint if required.
Legal & General offer group death in service cover and group income protection, but these covers cannot be increased or extended to join policies.
If a broad range of options when it comes to pension a protection products, within a workplace pension providers environment is required, it is important you chose your provider carefully as some can accommodate a lot more options than others. Aviva offer the broadest range of options for pension schemes and risk products. Of course, there are other group risk providers in the market, offering various different products, but this analysis is solely looking at what is available via pension providers.
