Compulsory S32 Pension for non-existant wife !

castle96

Hi, - these Qs from another board - still not answered. Any advice please ?
　
I have an old (1986) single premium purchased,, Sec32 Sun Life (now Friends Life), 'Flexible T plan. The single premium was a transfer value from a contracted out E'er pension scheme. Part is GMP
I was married at the time and "the plan was set up on an any wife basis. This means that we as Sun Life are legally obliged to provide to any wife to whom you are married, the following pensions........"
I have obtained quotations and a great chunk of the fund is being used to provide a 50% escalating Widows pension.
As I divorced years ago and will not remarry (nearly age 60, policy is written to age 60), this is somewhat annoying ! There will be NO widow to provide for, and MY pension is being reduced
Would it be possible to transfer this current fund as a single premium, to someone else who does not have this 'wife' stipulation, or would the original policy conditions still apply (Sun Life did say "to any wife to whom you are.married" I will not have a wife at my death. Definately
Any advice please. Fund value is £17800 - SEE BELOW

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thanks for answers/interest.
I do have another small pension - fund value of £1600
When I state the fund value of the AXA/Sun Life/FP as £17800, I should clarify...
The current value (excl. terminal bonus) is £15400. The current value incl. terminal bonus is £17225. Our current value quotations do not incl. terminal bonus as this bonus is only applicable if you take your benefits" ......
? So If I were to transfer the benefits NOW , ie before any terminal bonus is added(transfer value IS ? the same as the current value), to another Company ( ? who would take this small amount ? or is this for an IFA to conclude/advise),, then the current value of all of my pensions would be £15400 + £1600 = £17000, ie less than £18000. (1% of Lifetime Allowance)
1.) The receiving Company would not impose the same condition to provide a Widows pension ? I could opt for this provision NOT to be in the policy ?
2.) would now come under the triviality/lifetime rules and I could commute for max. cash, now ?
3.) SIPP ....? isn't this fund too small ?
comments please. Thanks

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Re 2.) above. I understand that ‘triviality’ cannot be done before age 60. As the ORIGINAL policy is written to age 60, that is when the terminal bonuses will be added (est. total fund then £17800), then with the other £1600 fund added, the total will be more than £18000, so I could not commute for cash ?!
If I transferred the existing fund to another Coy, I may incur some penalty/costs, and the fund at 60 could be ‘engineered' to be less than £18k in total. (Need to find a badly performing Coy !?).

dunstonh

Would it be possible to transfer this current fund as a single premium, to someone else who does not have this 'wife' stipulation, or would the original policy conditions still apply (Sun Life did say "to any wife to whom you are.married" I will not have a wife at my death. Definately
Any advice please. Fund value is £17800 - SEE BELOW

Yes and No.

If you transfer it before April 2012 and the transfer includes protected rights then the new scheme will also have the spouse rule. However, protected rights are being abolished in April 2012 and being reclassified as non-protected rights and you will not have this issue.

jamesd

If you go over the triviality limit you could transfer it then buy and sell shares until the share dealing charges reduce the total value of all of your pensions to no more than the limit.

Zelazny

One thing to bear in mind with triviality is that only 25% of the money is untaxed. You still pay income tax on the rest, so will end up with less than 18k in your pocket.

castle96

thanks all

Q - dunstonh...

that's interesting. So if I go past retirement age of 60 (2/12), I can still transfer the benefits/fund (will they add the terminal bonuses at 60, or when I transfer ? - ), after 4/12. So all of the fund will then be used ofr MY pension provision, not some set aside for a WDIR.

This will ? effectively be taking the Open Market Option - yes ?

Will Coy's be interested in such a small TV/single premium ? (Any ideas who/website ?)

dunstonh

that's interesting. So if I go past retirement age of 60 (2/12), I can still transfer the benefits/fund (will they add the terminal bonuses at 60, or when I transfer ? - ), after 4/12. So all of the fund will then be used ofr MY pension provision, not some set aside for a WDIR.

That is just a scheme age. You dont need to take it then. Some S32's stop accrual of benefits at the scheme age whilst others will continue. However, you can transfer it to a personal pension and take benefits after April 2012 on non-protected rights basis as protected rights will not exist. Whatever terminal bonus that has accrued on the plan will be paid on transfer.

This will ? effectively be taking the Open Market Option - yes ?

Similar but different forms and process. Technically it is more commonly known as an immediate vesting personal pension (IVPPP).

Will Coy's be interested in such a small TV/single premium ? (Any ideas who/website ?)

It is still above minimum premium for most £10k-12k is where most have their minimum. If you catch an IFA during a quiet period IFA then they may well do it even though its a small earner for them (about £180 is what the IFA would get).

However, don't assume that the rate will be better than the S32. The GMP is lost on transfer. So, the actual income on the S32 may well be higher even with a spouse pension.

castle96

thanks for that - most informative, especially the last bit - will need a careful look at after 4/12. thanks again

trina2010

castle96 wrote: »

Hi, - these Qs from another board - still not answered. Any advice please ?
　
I Part is GMP

I have obtained quotations and a great chunk of the fund is being used to provide a 50% escalating Widows pension.
There will be NO widow to provide for, and MY pension is being reduced
Would it be possible to transfer this current fund as a single premium, to someone else who does not have this 'wife' stipulation, or would the original policy conditions still apply .

those are the important bits just now, before the removal of protected rights.
Providers dont decide how GMP is to be taken, the Government decided that.
Your pension is not being reduced, widows provision is costed in at outset so removing it would not give you any more income and it cannot at this stage be removed.
In summary everyone else will have the 'wife stipulation' as it isnt for providers to decide.

To transfer your policy now there would need to be enough in the pot to cover the provision of the GMP for it to be converted at this stage to protected rights (which also specifies a widows provision) or the receiving company would have to accept the shortfall in cash and make up the difference themselves.

Also as Dunston rightly says you may well be better off sticking with the GMP as in a lot of cases they are pretty good, specially if you dont have enough in the pot to cover.

What is your GMP on your policy?

PaulCooper

Just a word of warning here, I've got one of these policies, taking out in the same circumstances as you. They have quite generous annuity rates, mine is 9.8%. They make a point of telling me that to achieve the returns illustrated, the pension must be taken on the retirement date. The implicatioin being if I did it a day late, all bets would be off and they would not honour the 9.8%. Just be careful before missing that date (wife or not)
Paul

castle96

thnks folks.
Will check on annuity rates (can't see any gurantee in the policy). Normal rate is ? 5% ?

The GMP is £6191. Non GMP £11034

dunstonh

The GMP is £6191. Non GMP £11034

If those are the income rates on a fund value of £17,800 (as given in #1) then there is no way any alternative will come close. It isnt even worth checking alternative as they are nowhere near.