Transfer of Section 32 pension

MIKE770

I had a section 32 in 1988 as well, Aviva added profits for about 3 years then static until I retired, I received a letter fromTax office stating that my pension from Aviva (norwich union) should xx per week, and not below the said figure, as the fund was incomplete due to the actual fund, they have paid out at that rate, so the guarantee was still in place.!

MIKE770

ozbrit wrote: »

casey_junior wrote: »

I have a section 32 pension which was transacted in August 1988, I understand that this was shortly after legislation on Company 40/60 pensions was changed, can anyone explain what the main benefit of this change to me would be?

On annual bonuses. I transferred ~14000 to the section 32 buyout and was given a guaranteed fund value of 101,330 in 2019 at age 65.

Between 1988 and 2001 I received statements which showed annual accruing of annual bonuses, these appeared lucrative and added a further 65000 in guaranteed bonus.

Of course since then there's been no annual bonus and indeed circa 2004-5, policyholders received notice from NU there was a change of policy by the Company and annual bonuses would cease.

Turn the clock back to circa 1997. NU was a Company owned by the members. The Management decided that it was in their and in ours the Members interests to sell out and become a publicly listed Company. Along with the statements issued at the time was a guarantee that profits to members policies would not be affected by this change of ownership.
I must have been a bit gullible in those days as I accepted the Managements argument and voted for the change and duly received some shares which I sold sometime later for ~ 4000. I realise trading conditions became quite dire soon after the turn of the new millenium, but while our annual bonuses were being quashed, the dividends for share-holders continued. I'm not suggesting that shareholders shouldn't get a return, but on reflecting on the Managements promise of 1997 I couldn't have been thinking straight to have accepted it.

I recognise that equities haven't performed in the past decade, but don't the fund managers invest in an array of investments, property, commodities, emerging markets, Insurance, treasury bonds etc. If so, why the continual focus on poorly performing equities?

Thanks for your time, these are some of my observations, but most of all I'd like to know whether Aviva are required to add anything to the final figure if what they make on their investments proves to be negligible?

Tell you what I wish I had had a fund that big guaranteed, mine only increases by 18,000 to retirement, anyway on payout the guarantee was far greater, so you see the benifit of a guarantee!.

dunstonh

in 1988, returns of 15% a year were thought the norm. So, the value of the guarantee was perceived to be very low then. However, when inflation came down and remained down, investment returns followed. Then we had the Asian Crisis, dot.com crash, US accountancy scandals and the credit crunch and global recession. All of which has placed the real value as being the guarantee amount.

It was not valuable in 1988 but it is valuable today for a lot of people.

The scheme it came from set a lot of the terms in relation to your S32. Not Aviva. They have to follow those terms, such as the GMP.

casey_junior

jamesd wrote: »

The guaranteed minimum pension is often an extremely valuable benefit. It could double the amount of income you get compared to buying an annuity on the open market. Or more, or less, depends on just what the guarantee is. You'd have to ask them for details of the Guaranteed Minimum Pension (GMP).

There is no GMP, no GAR.

Loughton_Monkey wrote: »

Surely you can understand the concept?

Who cares if prices rise by 2% in the 10th year to £149, or 20% to £175K? Discuss!

I can't accept your comparison as the guaranteed amount is the bottom line, actual value being only of interest to the seller.
However, lets talk about it in real terms.
I have a pot of money (>10000) held by an employer who closes one of his factories in 1987. He brings in a FA to tell us our options. The FA summarises my options as,

(a) Lump Sum of £742 + a preserved pension of £1121 pa increasing 5% pa to give a pension of £3616 at retirement, 2011 end.

(b) Preserved Pension of £2123 pa increasing by 5% pa to give a pension at retirement of £6848!

(c) Transfer Value of £9800 into an individual pension policy.

Based on those figures the FA supplies 3 illustrations, one from NU whichs guarantees a retirement fund of £39400, providing a pension of between £16692 and £22709 pa, payable monthly on the first of the month :T

The promise of riches couldn't be ignored unfortunately, so now my pension pot will buy a pension of c£2100 which is exactly where I was back in 1987.
This shows that the shareholders alone got the value of my investment.
Discuss.

ozbrit

I'm a little confused about a guaranteed min pension being mentioned here.

When I entered into my Section 32 agreement in 1988, they guaranteed a min final figure of 101330, plus a discretionary annual bonus plus the likelihood of a final bonus at age 65 - In 2019. As I've mentioned in a previous post, the accrued annual bonuses by 2001 had already boosted the final figure to a minimum of 168000.

I've always assumed that after the policy matures the pension payable from the final figure would be a simple calculation - a percentage of 168000 per year, probably in the region of 5%, whereas annuities appear to be currently yielding 6-7%pa.

I realise that nothing should be assumed (apart from the 168000 figure) but if 2019 were today, then what level of pension could I expect? What guarantee exists, as from what I can see, it appears that buying an annuity might be the way to go.

jamesd

There's no fixed level of guarantee, it depends on your specific agreement.

dunstonh

There are typically four types of guarantee. You may none of them or some of them.

1 - Guaranteed minimum pension that needs to be paid irrespective of the fund value
2 - guaranteed minimum fund value
3 - guaranteed annuity rate
4 - protected pension commencement lump sum/tax free cash (not strictly a guarantee but S32 got automatic transitional relief on A day which can result in greater than 25% tax free cash)

MIKE770

ozbrit wrote: »

I'm a little confused about a guaranteed min pension being mentioned here.

When I entered into my Section 32 agreement in 1988, they guaranteed a min final figure of 101330, plus a discretionary annual bonus plus the likelihood of a final bonus at age 65 - In 2019. As I've mentioned in a previous post, the accrued annual bonuses by 2001 had already boosted the final figure to a minimum of 168000.

I've always assumed that after the policy matures the pension payable from the final figure would be a simple calculation - a percentage of 168000 per year, probably in the region of 5%, whereas annuities appear to be currently yielding 6-7%pa.

I realise that nothing should be assumed (apart from the 168000 figure) but if 2019 were today, then what level of pension could I expect? What guarantee exists, as from what I can see, it appears that buying an annuity might be the way to go.

At the end of the day - you will get the guaranteed amount as a miinimum, no-body can say what if any future profits will produce, Just sit back and wait until just before retirement as we all had to do and see what happens, it is out of our hands.!

And like many of us clap our hands :T until the tax man commith and you end up working part time because you have been conned by them.

casey_junior

casey_junior wrote: »

(b) Preserved Pension of £2123 pa increasing by 5% pa to give a pension at retirement of £6848!

(c) Transfer Value of £9800 into an individual pension policy.

Based on those figures the FA supplies 3 illustrations, one from NU whichs guarantees a retirement fund of £39400, providing a pension of between £16692 and £22709 pa, payable monthly on the first of the month :T

The promise of riches couldn't be ignored unfortunately, so now my pension pot will buy a pension of c£2100 which is exactly where I was back in 1987.
This shows that the shareholders alone got the value of my investment.
Discuss.

As I've had no comments on my submission I therefore take it that you are all in agreement that in 1988 Aviva took my pension pot telling me I could expect from them a pension of £16k-£22k as opposed to my employer's scheme which was giving me almost £7k, and now I can expect in December a pension of c£2200 pa 1!!!!
This was the value of my pension in 1988, therefore I have received absolutely no benefit at all from Aviva, whereas their shareholders hae got all the valuable benefit from my investment.
Atotal rip-off or what?

ozbrit

MIKE770 wrote: »

Just sit back and wait until just before retirement as we all had to do and see what happens, it is out of our hands.!

Actually Mike, My Missus and me have been retired since Mar' 2009. We were fortunate in selling a fully paid off home in Brentwood and moved to Australia when the exchange rate was very advantageous in 2004. With no debt and a further move into the Countryside we traded down and live on our savings and investments. Term deposits downunder still yield 6.7% for us and we'll be virtually skint apart from the home we live in when our state pension and other private pensions kick in. We haven't got everything we want, but do have everything we need to be happy and of course it beats working.

We believe that it's better to enjoy money while one is young enough to, my Wife has serious arthritis and joint problems. We don't feel that we'll need as much of the folding stuff when we're in our 70's & 80's, that's if we should be so blessed as to arrive there