Transfer of Section 32 pension

cornerstone13

The GMP is £4,800 pa and I can't see anything about GAR. Using the FSA tables shows I wouldn't get anything like that with an annuity.

windsurfrun

Interested in the age quotes - does your plan give you a Guaranteed Minimum Pension at age 62 irrespective of the fund value? I ask because I retire at 60 but Norwich Union are claiming they do not have to pay the GMP until state retirement age 65 (because the fund has performed so abysmally and can't pay the GMP before then). The way I read the contract of the transfer plan it does not permit them to do this and requires them to pay the GMP at the plan's benefit date which would be when I'm 60. So I would be interested in your situation.

doublekite wrote: »

I have a pension with Norwich Union which was a section 32 transfer and gives me a guaranteed fund value at retirement. I am n0w 51 and it can be taken at age 62.

There has been no annual bonus paid by NU for the last 3 years, and I am getting frustrated. Is it possible to transfer this fund to another provider, and if so would it be worthwhile or are there hidden costs to consider? What is the best time to transfer if this is an option?

Any advice appreciated.

dunstonh

I ask because I retire at 60 but Norwich Union are claiming they do not have to pay the GMP until state retirement age 65 (because the fund has performed so abysmally and can't pay the GMP before then).

It hasnt performed abysmally. It just hasnt performed in line with the original expectations. Most of which were made during the high inflation days where returns were higher.

They are correct in that they can hold back the commencement. However, like all S32s you can transfer out and commence benefits early with the loss of the guarantees.

EdInvestor

What is the retirement date on the contract?That's when NU has to pay - it may not be the same as state retirement age.

windsurfrun

Thx. I replied to 'Dunstonh' but doesn't appear in the thread. My contract states:' At the Benefit Date so much of the Capital Sum as shall be appropriate shall be applied using the Society's then current annuity rates to purchase an immediate pension payable to the insured which shall not be less than the GMP.' The Benefit Date is when I'm 60 - further the contract sets out how the GMP is calculated (£363.48 increasing 8.5% p.a. until attainment of state pension age) - the purpose of this clause being to know and agree at the outset the GMP payable at age 60 and for the benefit of NU to put a cap on annual increases in GMP at age 65.
There is nothing in the contract that states if there is insufficient capital sum at the Benefit Date the GMP will be deferred to 65. It seems this is a scenario that had not been considered by Norwich Union and it is now declining to honour the contract. I am therefore interested in 'Doublekite's' contract because if they are in the same position then when they reach 62 they may find Norwich Union will try to defer payment of their GMP for 3 years - if so we should discuss what to do next.

EdInvestor wrote: »

What is the retirement date on the contract?That's when NU has to pay - it may not be the same as state retirement age.

EdInvestor

I would suggest you challenge this. It may be useful to go via a reasonably high powered IFA eg William Burrows or Alan Steel, both of whom have a track record of speaking up when insurance companies try to diddle customers.
https://www.alansteel.com
www.williamburrows.co.uk

It's quite a good one for the newspapers as well, Mail on Sunday is one of the best for following up this kind of thing.

BrookStreet

I have a very similar Norwich Union Section 32 except mine pays at age 65. No Bonuses have been added since 2000. I am 65 in 8 weeks time and I have just received the offer from NU. They are meeting the Pension Guarantee and the Widows Guarantee but are refusing to pay the 5% Pension Escalation saying the fund is large enough. If you look at your Policy you will see that the word 'Guarantee' is not in the section relative to Pension Escalation even though it is obvious that it was intended to be paid. They have also offered me the fund if I wish to purchase an annuity elsewhere but they have not included any terminal bonus. Beware of Norwich Union Section 32 Plan, all is not as it seems. At present I am considering my options

doublekite wrote: »

Thanks to those who resonded. It would seem foolish to transfer out and lose flexibility and/or benefits.

I really have no grasp of pension small print, but my facts are as follows and I would appreciate your comments:

Current age 51
Pension can be payable at 62 (reduced amount of course)
Transferred in £4970.55 ( of which £2172.63 was my contributions) 9.2.89
With profits benefit £33,431
Annual bonus to date £20,468.30 (cannot be taken away?)
Final bonus not guaranteed, depends on market at retirement.
Guaranteed Minimum Pension £345.28 x 8.5% compound, which I reckon is £5097.45
Lump sum death benefit £2172.63
Maximum pension quoted as £1664.25 x 5% compound (£7,730) or x RPI which ever is greater
Widows pension is 2/3 of max pension or £1109.50 x 5% pa
Guaranteed minimum widows pension is £2548.78

Any help appreciated...are these figures generous?

Am I correct in saying that the GMP of £5097.45 is the important figure to consider?

Do I need to look at annuity tables for my total fund value of £33,431 + bonus so far of £20,468.30 = £53,899.30?

I am a non smoker.

dunstonh

Beware of Norwich Union Section 32 Plan

Its not a case of "beware" but "be aware". Many NU S32 plans are very good. Issues over GMP tend to affect all section 32s not just those of a certain provider.

MikeJones_2

Hi doublekite, surv66, cornerstone13, windsurfrun and BrookStreet,


Guaranteed Minimum Pension at State Pension Age from a Section 32 Buyout
A Section 32 Buyout provider must provide you with your Revalued Guaranteed Minimum Pension at State Pension Age. This was an absolute minimum legal provision when you transferred your pension to the product provider.

If your Normal Retirement Date (NRD) is earlier than your State Pension Age, and if there is insufficient 'money in the pot' within your Section 32 Buyout policy at that age (or any age earlier than your State Pension Age) then the product provider has no obligation to pay you a pension at your NRD.

This is because whatever fund is available in your pot must be used in the first instance to provide you with your Revalued GMP at State Pension Age. Anything else left in the pot after paying that can be used for a cash lump sum or more pension (or both).

The product provider may be able to give you a smaller pension before your State Pension Age (SPA) along with annual increases up to your SPA, but those increases must bring your pension up to your Revelaued Guaranteed Minimum Pension at SPA. I'm not too sure that this would be an option with the majority of Section 32 product providers though. It would depend upon the policy wording.

The Revalued Guaranteed Minimum Pension at SPA may be split in to ‘Pre 6th April 1988 GMP’ and ‘Post 5th April 1988 GMP. The reason that these two elements are ringfenced is simply to do with pension increases after SPA.

The Section 32 Buyout provisions mean that there is no pension increase provided by the Insurance Company on the Pre ’88 Apr GMP element.

However, if you have any Post Apr ’88 GMP, the Insurance Company will have to give you increases of 3% p.a. after SPA.

If you have a GMP then there is also a legal requirement for the Section 32 Buyout to pay a Widow(er)’s GMP on your death either before or after your State Pension Age.


For male policyholders, the Widow’s GMP is 50% of the your entire GMP revalued to the date of your death (includes Pre and Post ’88 GMP).

For female policyholders the Widower’s GMP is only 50% of the Post April ’88 GMP revalued to the date of death.


Comments for individual posters


doublekite - GMP revalues by whole tax years from the date you left pensionable service with your former employer to your State Pension Age - i.e. if you left in Jan 1989 your first year's GMP revaluation begins 06/04/1989 and would end on the 5th April in the year before you reach State Pension Age. Your estimation of your own RGMP of £5,097.45 appears to be correct as it is double the Widow's GMP you stated of £2,548.78.


EdInvestor's guestimate of a fund of £70k needed to provide a RGMP of £5,097.45 doesn't allow for the statutory requirement to provide a widow's GMP of 50% (and if you have any Post '88 GMP, the 3% p.a. pension increases too. My estimate would be in the region of £110,000 - £125,000 to provide the RGMP you have quoted - and that of course assumes annuity rates when you reach SPA are broadly similar to today's).


cornerstone 13 - you need to focus on the Revalued Guaranteed Minimum Pension rather than the GMP. It's not clear from your post whether the figure you've provided is the GMP at the date you left your former employer or whether it's the RGMP at your State Pension Age. If it's your GMP we can calculate the RGMP for you if you want, but we need a couple of dates first - just request and we'll assist.


brookstreet - do you have a GMP as it's not clear in your post - it'll be on your Policy Document?


surv66 - reference your quote: my policy gives a GMP of £5500 single life at 65 in 9 years time. Is it GMP at the date of leaving or the RGMP at State Pension Age? Single life GMP only exists for a female Section 32 policyholder with ONLY Pre '88 GMP. Is that you?


windsurfin - reference your quote: I ask because I retire at 60 but Norwich Union are claiming they do not have to pay the GMP until state retirement age 65. If you're a male then what you have quoted is correct (as stated in my description of GMP above).



Apologies for the lengthy post - but I thought I'd try to clarify points for all concerned.

Mike


I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

BrookStreet

I do not have a problem with GMP. On 6/4/1982 my GMP was £222.56 increasing by 8.5% compound to 4/4/2008. My GMP pays 1/4/2009 after my 65 birthday

Nu have offered me £1,856.40 with a guarantee of 5 years and 50% Guaranteed Widows Pension.

My Grouse with NU is that, in the policy, immediately following the GMP and WGMP clauses it states:-
'Escalation Percentage Rate'

'5.00% per annum compound'

In the offer letter NU state:-

'It has been necessary to remove the 5% pension escalation under the policy to cover the GMP liability.'

Since 2000 no annual bonus has been added, each year NU saying that no bonus could be added th meet the GMP. No terminal bonus has been added either.

My IFA has advised me to accpet the offer but I am not sure. Does anyone have any ideas.