Difference in Group personal pension scheme and Master Trust
Discussion
Hi All
I couldn't fit everything into the title, the title should read;
What is the difference between a Group personal pension scheme and a Master trust?
Our company is migrating pensions from the former to the latter and as a relative layman I want to know what the difference is? I have a reasonable sum in my current work scheme, I have the choice of transferring it to the new scheme to benefit of the 5% employer contribution on top of my 5% or leaving it.
Should I just go ahead? Is there anything I should be worrying about?
I couldn't fit everything into the title, the title should read;
What is the difference between a Group personal pension scheme and a Master trust?
Our company is migrating pensions from the former to the latter and as a relative layman I want to know what the difference is? I have a reasonable sum in my current work scheme, I have the choice of transferring it to the new scheme to benefit of the 5% employer contribution on top of my 5% or leaving it.
Should I just go ahead? Is there anything I should be worrying about?
GPP's are typically with an insurance company, organised by your employer and setup so that you as an individual contract directly with the provider, but under the governance of the employer.
mastertrusts are, as the name suggests trust based, with their own trustees such that the employer can handover governance responsibilities to the trust, as agreed with the pension regulator.
in many respects they are similar, in that both are run by external companies on behalf of a group of employers and pool members funds however there are some subtle differences that depend on the particular schemes involved rather than a general difference
1. choice of funds - most mastertrusts offer less choice than for a GPP, however most members don't move out of the default options. Depends how much you actively manage your funds within the pension.
2. fees - depends on each scheme and the relative bargaining power of your employer - check the small print and see which one is best for you
3. tax relief - depends on how your employer has set it up, but quite common to use salary sacrifice in setting up new mastertrust arrangements, which may save you something on national insurance if not already offered
4. retirement options - depending on the particular scheme your in today, you could get more or less flexibility at retirement. in a scheme i'm in, the mastertrust provided options the old scheme didn't have so this was a big selling point
if you get 5% contribution in the case of the new scheme and nothing in the case of the old one, then that should be financially advantageous to you.
However you might have the choice to leave your current pot where it is and move to the new provider only for new contributions, which could also be an option
mastertrusts are, as the name suggests trust based, with their own trustees such that the employer can handover governance responsibilities to the trust, as agreed with the pension regulator.
in many respects they are similar, in that both are run by external companies on behalf of a group of employers and pool members funds however there are some subtle differences that depend on the particular schemes involved rather than a general difference
1. choice of funds - most mastertrusts offer less choice than for a GPP, however most members don't move out of the default options. Depends how much you actively manage your funds within the pension.
2. fees - depends on each scheme and the relative bargaining power of your employer - check the small print and see which one is best for you
3. tax relief - depends on how your employer has set it up, but quite common to use salary sacrifice in setting up new mastertrust arrangements, which may save you something on national insurance if not already offered
4. retirement options - depending on the particular scheme your in today, you could get more or less flexibility at retirement. in a scheme i'm in, the mastertrust provided options the old scheme didn't have so this was a big selling point
if you get 5% contribution in the case of the new scheme and nothing in the case of the old one, then that should be financially advantageous to you.
However you might have the choice to leave your current pot where it is and move to the new provider only for new contributions, which could also be an option
Great explanation Boshy thanks.
I'm nervous of the transfer part, the pension provider is the same so I assume that on transfer day the pot (pension valuation) will buy the same amount of units in the master trust as it did in the GPP?
ETA; Yes the new scheme now offers a salary exchange to avoid N.I contributions.
I'm nervous of the transfer part, the pension provider is the same so I assume that on transfer day the pot (pension valuation) will buy the same amount of units in the master trust as it did in the GPP?
ETA; Yes the new scheme now offers a salary exchange to avoid N.I contributions.
Edited by 46and2 on Wednesday 8th September 16:58
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