Section 32 - move pension or leave with Standard Life

chucky

I've got a Section 32 with Standard Life that has a fund value of around £12k.

I'm looking at the options of what I can do with it.

1. Sell my funds and move as a cash transfer to my SIPP losing my Section 32 benefits.
2. Leave the funds with Standard Life as a Section 32 pension - annual charge is 0.65%.

My preferred option was to make an In-Specie transfer to my SIPP but apparently Standard Life don't allow this.

I'm mid to late 30s so was weighing up the best thing whether to forget about the Section 32 benefits and move the funds to my SIPP using them there to trade with or otherwise just leave them with Standard Life as a Section 32..

Anyone have any views on this?

EdInvestor

Have you looked at the S32 benefits to see what investment return you would need to make to beat them?That's the key factor.The S32 is really like a company pension, so the annual charges and investment returns are basically irrelevant.SL will pay you at retirement what it agreed to pay originally if you just stay put.How much is that, do you know?S32s are often revalued over the years and may be worth rather more than the plan value suggests.

As a first step, you should investigate this in more detail so that you are fully aware of the value of what you are thinking of giving up..

chucky

EdInvestor wrote: »

Have you looked at the S32 benefits to see what investment return you would need to make to beat them?That's the key factor.The S32 is really like a company pension, so the annual charges and investment returns are basically irrelevant.SL will pay you at retirement what it agreed to pay originally if you just stay put.How much is that, do you know?S32s are often revalued over the years and may be worth rather more than the plan value suggests.

As a first step, you should investigate this in more detail so that you are fully aware of the value of what you are thinking of giving up..

thanks Ed

it's an old company pension. they said the benefit was that it was a tax free lump sum upon retirement.
all they said was that it was over 25%.
should they be more specific?

dunstonh

it's an old company pension. they said the benefit was that it was a tax free lump sum upon retirement.
all they said was that it was over 25%.

Sounds like it has a protected lump sum. There may also be GMP and/or guranteed annuity rates factored in there as well.

should they be more specific?

The people on the phone at the insurers cant give advice or opinion and tend to know very little, if anything, about the policy you have apart from the basic information they have in front of them on their screen. So, you dont often get a lot offered over the phone. You could ask them to send you policy details. You will probably get more info that way.

chucky

dunstonh wrote: »

Sounds like it has a protected lump sum. There may also be GMP and/or guranteed annuity rates factored in there as well.

Thanks Dunston

My initial thoughts were that if I switched these funds into cash and transferred them to my SIPP would that offset the benefit of the tax free cash lump sum i would get seeing that my fund was only currently £12k.

i'm assuming my SIPP will grow at between 5%-7% per year

dunstonh

i'm assuming my SIPP will grow at between 5%-7% per year

Maybe. However, what level of GMP have you got on the S32? Are there guaranteed annuity rates as well?

e.g. if the GAR is 50% higher than the open market rates then any fund is going to have to grow by at least 50% to pay you the same benefits. If there is a GMP the SIPP may never get close to providing that level of income.

chucky

dunstonh wrote: »

Maybe. However, what level of GMP have you got on the S32? Are there guaranteed annuity rates as well?

e.g. if the GAR is 50% higher than the open market rates then any fund is going to have to grow by at least 50% to pay you the same benefits. If there is a GMP the SIPP may never get close to providing that level of income.

Thanks Dunston

I've just spoken to them and it's up to a 100% tax free cash lump sum and there would be no GMP.

what's your thoughts on that?
would you suggest keeping it where it is and preserving the Section 32?

dunstonh

100% tax free cash but low potential growth (but mostly capital guaranteed) vs 25% TFC and unknown but hopefully better growth.

Its a judgement call you now need to make and only time will tell which was best.

You could use the Std Life plan as your lower risk part of your portfolio. i.e. consider the Std Life pot and the SIPP pot as one overall portfolio and allocate the Std life as a cash life/fixed interest sector equivalent