Group Section 32 Buy Out

GiJo

I have been informed that an old company pension with Scottish Equitable (High Equity With Profit Fund) is being transferred by the trustees into my own name. The Financial Management company that is dealing with this transfer has chosen as the default fund the Aegon SE Managed Mixed Fund. I am considering retiring in four and a half years time, should I be thinking about a "safe" fund now or later?

Linton

IMHO .....

Assuming
- you intend to purchase an annuity when you retire in 4.5 years
- this pension is necessary to fund your retirement
- its current value is reasonably close to being sufficient to fund your retirement
- you dont fancy a gamble

I would certainly put a significant part of the pot (more than 50%, possibly up to 100%) into something very safe now. You can then steadily transfer further funds from the riskier fund into the safe one during the next 3-4 years so that you are fully safe before you take any irrevocable actions.

If the assumptions dont hold - for example you have sufficient funds elsewhere to retire, you could keep your SE pension exposed to equities with the intention of taking it later if necessary.

cogito

Linton wrote: »

IMHO .....

Assuming
- you intend to purchase an annuity when you retire in 4.5 years
- this pension is necessary to fund your retirement
- its current value is reasonably close to being sufficient to fund your retirement
- you dont fancy a gamble

I would certainly put a significant part of the pot (more than 50%, possibly up to 100%) into something very safe now. You can then steadily transfer further funds from the riskier fund into the safe one during the next 3-4 years so that you are fully safe before you take any irrevocable actions.

If the assumptions dont hold - for example you have sufficient funds elsewhere to retire, you could keep your SE pension exposed to equities with the intention of taking it later if necessary.

But what in the current climate can be regarded as very safe? A fund such as Standard Life Sterling Fund?

Linton

cogito wrote: »

But what in the current climate can be regarded as very safe? A fund such as Standard Life Sterling Fund?

Have a look on http://www.trustnet.com/Pension.aspx for fixed interest and cash funds.

EdInvestor

GiJo wrote: »

I have been informed that an old company pension with Scottish Equitable (High Equity With Profit Fund) is being transferred by the trustees into my own name. The Financial Management company that is dealing with this transfer has chosen as the default fund the Aegon SE Managed Mixed Fund. I am considering retiring in four and a half years time, should I be thinking about a "safe" fund now or later?

Typically, the reason why S32 buyout pensions are invested in the insurance company's With profits fund, is that they have guarantees attached to them which the insurer must meet, regardless of the investment performance of the fund.

Does this move have any implications for any guarantees that may be attached to your S32 policy?Typical guarantees would be a guaranteed minimum pension (GMP, relates to being contracted out of SERPs) , spouse pension, indexation after retirement, etc.

An S32 contains a number of elements which are derived from your original final salary pension, in which risk is borne by the employer (and later the insurance company).What is being suggested however looks more like a money purchase pension in which risk is borne by the employee.

Suggest you clarify exactly what is being proposed by the change.

GiJo

Thanks for the replies. Will have to do some research.