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Group Occupational Pension (Contracted In Money Purchase) - Overview


Unlike some schemes, with a Group Occupational Pension Scheme (Contracted In Money Purchase) the employer makes pension contributions on behalf of the employee. The scheme's rules may also require the employee to make contributions themselves.

This means that it's a company pension scheme to enable employers to build up pension benefits for employees. The benefits the employee gets when they retire will depend on a number of things. These include how much has been paid in, how the investments perform and annuity rates at the time they take their benefits.

Although the scheme is set up by the employer, it has trustees and has to meet legal requirements that exist to protect the interests of the employee. The scheme's trustees also decide how to invest the scheme's money in AXA's wide range of pension funds and some managed by other investment fund managers. Or, if the scheme's rules allow the employee may be able to select the pension funds themselves.

Please remember that the value of investments can fall as well as rise and is not guaranteed. This means that the value of a retirement fund may be less than the amount of contributions invested.

  • Facts about the Group Occupational Pension (Contracted In Money Purchase)

Fact

Description

Contributions

The employee and the employer will agree the amount of any contributions to be made each year. The employee will normally receive tax relief on contributions they pay to all their pension arrangements up to 100% of their UK taxable earnings (or £3600 if their earnings are less than this).

Minimum contribution

The minimum contribution is £20 per month or £200 per year.

Employer contributions

Yes.

Benefits

Pension or a tax free cash sum of up to 25% of their fund and a reduced pension (other options may be available. Your financial adviser can provide information).

Minimum age

The employer should notify the employee of the minimum age for joining the scheme.

Pension age

The employer sets the retirement age for the scheme. This is the age the employee can normally retire. The employee may be able to retire at any age from 50 to 75 with the agreement of the trustees and employer, but the lower age is changing to 55 on 6 April 2010. The employee can take their benefits even while they are still working.

Tax

Tax relief on contributions up to the greater of 100% of the employee's relevant UK earnings which are chargeable to income tax and £3,600, less contributions paid into any other pension arrangement in that tax year.

However, the employee may become liable to a tax charge if contributions paid to all their money purchase schemes plus the increase in the value of their pension benefits in defined benefit schemes over a tax year exceeds the annual allowance for that tax year. The annual allowance is £245,000 for the 2009/10 tax year increasing to £255,000 for the following 6 tax years.

When the employee takes their benefits, 25% of their fund can usually be taken as a tax free cash sum. If the value of the benefits being taken is greater than the employee’s remaining lifetime allowance the excess may be subject to a tax charge. The standard lifetime allowance is £1,750,000 for the 2009/10 tax year increasing to £1,800,000 for the next 6 tax years.


Pensions are currently taxed through PAYE. Tax paid on the pension income will depend on the employee's income tax rate at the time the pension is paid.

These are the current rules but remember, all tax rules mentioned here could change in the future and their value depends on each employee’s individual circumstances. The tax information is based on our understanding of current tax legislation.

Charges

The charges we make cover the cost of setting up the plan and any advice provided (unless the trustees are paying a fee to their adviser). They also include the cost of administering the plan and professionally investing the money. We take a yearly management charge for the retirement fund and the standard amount is 1% of the value of the funds held with us. Some funds may incur additional costs and details of these may be found in the Pension Funds Guide.


Some funds may incur additional costs and these are reflected in the unit price.

Funds

A wide range of funds managed by both AXA and other investment fund managers. The funds invest in different assets, such a stock markets and property. Fund charges may vary depending on the fund chosen. Please ask your financial adviser for details of any minimum investment per fund.