Section 32 buyout with AVC

gettingolder_2

In 1986 I transferred the contributions of my final salary pension scheme to a Section 32 buyout bond with a now discredited assurance company. The normal retirement date is 2 years away and it looks as if the fund won't be enough to meet the GMP requirement. I also transferred my AVC contributions to the same policy. Will the assurance company be permitted to use the AVC contributions to help fund the GMP pension or will be I be entitled to an additional pension on top of the GMP?

JOHNGT

AVCs are regarded as part of the overall benefits under the scheme and would normally be transferred in conjunction with the transfer value representing the main scheme benefits (i.e. the normal 60ths/80ths etc.)

Therefore, as the AVCs are part of the overall scheme benefits, they would have been used to support the GMP under a S32. In other words all you will get is the GMP and not the GMP plus the AVC fund.

However, it is possible that the terms and conditions of the S32 (probably called policy provisions) only used the main scheme benefits to guarantee the GMP and put the AVC fund into a separate segment or 'arrangement'.

Suggest you have a read of the policy provisions and if you don't have these, ask for a copy from the insurance company of the policy provisions in force at the time your S32 started.

All that said, the cost of buying the GMP is greater than the value of your total fund so you have been protected to some extent. For example, if you had transferred your whole fund to a personal pension, which doesn't have a GMP, your total fund value (if it had performed in line with the S32) would not be enough to purchase the GMP that the S32 guarantees.

gettingolder_2

Thank you JOHNGT for your prompt reply. I have read the policy wording and believe the AVC contributions have no special standing with regard to funding the GMP. This highlights an important point which others should be aware of - my employer was obliged to transfer sufficient funds to cover the GMP. The AVCs could have been transfered to a separate policy. By combining them into a single policy they have provided no value to the final pension i.e. they are now worth zero. I now need to check who advised me to transfer them into the same policy without pointing out this risk.