Section 32 Pension Policy after April 2015

BIKER77

Hi Xylophone, thanks for your reply plus your links too.


Basically my wife is just 59 yrs now and the 2 section 32's are for next July 2015. Her state pension now is for when she is 66yrs as the goal posts have been moved.
We know that although the state pension increased her section 32's will be paid at 60 yrs next year .
The whole pension which if she took option 2 a yearly pension of £4470 plus the 5% increase yearly for life along with the lump sum of £20600...
I suppose if we are honest although its in black & white its the first policy paying £4770 per year from life from a £31500 pot?!( which is now at £35k)...plus the £20600 tax free lump sum too..although is this where the 2 nd policy comes in ?.....
We will be getting a local IFA but we need to get the understanding of things more as like us all it really does become interesting too. Last week Aviva are posting the latest update which they said on the phone last week which again is below...


Fund retirement of both together will be 5710 per year or


tax free lump sum of 20600 and a guaranteed minimum pension of 4470.44 per year...

Thanks again ...Biker77....

xylophone

Basically my wife is just 59 yrs now
https://www.gov.uk/state-pension-statement/y/on-or-after-6-april-2016/woman/between-6-april-1955-and-5-april-1960
worth doing before you see the adviser?

It will still be a good idea to check whether it is the whole of the GMP that will increase by 5% per annum for life?

BIKER77

Just been and checked my wifes state pension details and it states she has 41 qualifying years as from this April 2014, so by July 2021 when she will be 66yrs she will have 48 qualifying years .
( we both do those E-service state pension service on line).


As for the GMP all the policy states is as follows: Benefits will increase at a rate of 5.00% p.a. compound on the anniversary of the first date of payment.
Then from Aviva last July 2013 The pensions including the GMP will increase by 5.00% a year starting from 01 August 2016.


What are your thoughts re;
Basically my wife is just 59 yrs now and the 2 section 32's are for next July 2015. Her state pension now is for when she is 66yrs as the goal posts have been moved.
We know that although the state pension increased her section 32's will be paid at 60 yrs next year .
The whole pension which if she took option 2 a yearly pension of £4470 plus the 5% increase yearly for life along with the lump sum of £20600...
I suppose if we are honest although its in black & white its the first policy paying £4770 per year from life from a £31500 pot?!( which is now at £35k)...plus the £20600 tax free lump sum too..although is this where the 2 nd policy comes in ?.....
We will be getting a local IFA but we need to get the understanding of things more as like us all it really does become interesting too. Last week Aviva are posting the latest update which they said on the phone last week which again is below...


Fund retirement of both together will be 5710 per year or


tax free lump sum of 20600 and a guaranteed minimum pension of 4470.44 per year...

Thanks again ...Biker77....

xylophone

As your wife will be receiving her state pension in single tier (the legislation has now been passed) she should read
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

particularly in regard to the contracted out deduction

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdfit It is something of a surprise to read that the whole of the GMP will increase by 5% for life - it is more usual to see the pre 88/post 88/excess separated out because the insurer is not bound to provide increases on pre 88 GMP or anything above 3% on post 88 GMP once the GMP age is reached - there would usually be some insurer provided increase on the excess.

However, clearly all depends on the terms of your wife's particular policy and your IFA will be able to work out what is best for
her.

mrschaucer

When your wife got her redress payment in 2000 and it "could not be put into the first policy", did she get a letter saying that because it was a redress payment it would specifically NOT be used to fund the GMP payment on the first policy, and would be used to provide ADDITIONAL benefits only? You do need to check as it is sometimes expedient for insurance companies to "conflate" retirement benefits from the two policies without spelling out exactly what they have taken from where ...

BIKER77

Hi Mrschaucer, thanks for your reply, slowly but surely starting to understand things a little by little , seems we won't know it all upto the last 8 weeks!. Although having said that we were told by the provider's advisors that my wife does a "special deal"! with a guaranteed minimum pension fund of £89,408.19p for when my wife reaches 60yrs next July. ( last week we did ask for more info to really back up what was said on the phone to my wife last week.
Anyway, re the redress back in June 2000 afraid there is nothing mentioned in the letter and no mention of GMP neither on the redress policy too..but..last year with our projection from Aviva we did get this saying : We have combined your benefits from both policies in to one illustration . However, the first policy ( the one with GMP) will be used to provide the GMP and the second policy ( basically the redress one) will PROVIDE EXTRA BENEFITS. and that's really all we have ....does this help you in anyway?...




Also would you be able to give any advice on the following:
Basically my wife is just 59 yrs now and the 2 section 32's are for next July 2015. Her state pension now is for when she is 66yrs as the goal posts have been moved.
We know that although the state pension increased her section 32's will be paid at 60 yrs next year .
The whole pension which if she took option 2 a yearly pension of £4470 plus the 5% increase yearly for life along with the lump sum of £20600...
I suppose if we are honest although its in black & white its the first policy paying £4770 per year from life from a £31500 pot?!( which is now at £35k)...plus the £20600 tax free lump sum too..although is this where the 2 nd policy comes in ?.....
We will be getting a local IFA but we need to get the understanding of things more as like us all it really does become interesting too. Last week Aviva are posting the latest update which they said on the phone last week which again is below...


Fund retirement of both together will be 5710 per year or


tax free lump sum of 20600 and a guaranteed minimum pension of 4470.44 per year...


Thanks again for your help and your time too...Biker77...

mrschaucer

I appreciate the insurance co can't give precise figures yet, but if they are paying the gmp of £4470 pa from Fund 1 ONLY (you say it is guaranteed to be at least £31504, could end up more), then that leaves you with the whole of Fund 2 for additional benefits. So at least £34975 (guaranteed) to do something with. (They seem to be estimating a total fund just south of £90K, which is even better.)
a) So if in return for your two funds they are offering one annuity of £5710 (and no cash lump sum?), then that would mean £4470 from Fund 1 and £1240 from Fund 2. Is that right?
b) Or you say there is the option of £4470pa with a cash sum of £20,600. So from the total of the two funds, say 90K-ish, Fund 1 (30-oddK) is used for the £4470, and they are assuming you would like the 25% tax free lump sum. But what about the rest of the money? 90K total minus 20.5K lump sum minus (say) 35K Fund 1 leaves quite a bit.
Am I missing something? I'm not casting doubts on the insurance company at all, but as with everything, "special deals" need to be looked at carefully. A breakdown of where they get their figures from and which fund is doing what would be useful for you to know before you make any decisions.

BIKER77

A very big thanks again and nice that we are understanding things more. That Fund 1 was currently at £35k last week and Fund 2 at £32.5k and we are awaiting confirmation in writing of this which should be with us soon. As you rightly said they are assuming around the 90k for both Funds.
So as we agree Fund1 is now taking care of the 4470 pa and then leaves Fund 2 which hopefully hits its 34795....but ...regarding to that option 1 in taking the 5170 pa and only leaves quite a lot as you were saying too. To be honest for certain reasons we would be going for option 2 at this point which is 4470 + 20600 25% lump sum which they did say the 25% tax free lump sum would be taken from the both policies in the way of merging them and again where we are not seeing it either?...as you pointed out there is quite a bit of money short. Having a full breakdown is some very good advice you have given and we will certainly be looking for this before making any decision etc.
What I will do is see if there is any more info supplied as we did ask them for a better breakdown and if not will get on the phone until we know. As you also said its understandable that they cannot give exact figures until the 8 week period but at the same time we all need something to work on don't we..
So, would you think they won't be touching any of the Fund2 to make any GMP up etc as they said from the beginning it was 31500 and is just over 35k as last week, does this sound about right?..
Thanks again its very much appreciated, its ok some saying get a IFA which we are looking in to but we always say its best to try and educate oneself a little first so at least we know a little of what they will be talking about... Biker77..

mrschaucer

Well, put it this way.
Back in the day you were advised to do a Section 32 with your pension pot (fund 1). The insurance co took it on in the full understanding that it (the company) was obliged to cover your gmp whatever happened to the fund before your pension age. So even if the fund was completely wiped out, your gmp would be secure. This would be the very minimum they would be able to pay in the way of pension from this Fund 1, on its own, not using anything else.
You then got a redress payment which went to the same company (Fund 2). This was presumably for mis-selling, and the aim of the payment was to provide you with additional benefits over and above what would be available from Fund 1. (If you had not applied for the redress payment, there would have been no Fund 2, but as above, your gmp would have been covered anyway at the company's risk.)

I think I'm really just advising caution and for you to dig down into the figures provided to understand exactly where things are coming from. In my case, the initial fund was not enough to cover gmp, and had I not provided proof that my redress sum was only to be used for additional benefits, the company was on course to use my Fund 2 for gmp purposes rather than cough up themselves. In the end, I got
a) GMP covered by fund 1 (increased at the company's expense)
b) Additional pension provided by fund 2
c) 25% lump sum - and note that it was 25% of the sum of the INCREASED fund 1 plus fund 2.


So, no, to answer your question, in my opinion they really shouldn't be touching your fund 2 for gmp purposes - the money is to compensate YOU for mis-selling, not help the insurance company with its legal commitments on the gmp which they would have had to cover anyway. It is however difficult to know exactly what they are doing if they put both funds together, as they seem to have done. At least you now know a few more questions to ask.

BIKER77

Again a very big thanks for you taking your time and advice Mrschaucer as its really been good for us to here both your experiences and to help us really what to look out for. Things are much more clearer to us now and as you said we certainly do know a few more questions to ask etc and this is exactly what both and my wife were looking for.
Yes, that redress money was for for mis-selling! 89% which really makes one think doesn't it!. Anyway we see things as you have said in your opinion and it will be very interesting to see what we actually receive from the provider, its been 10 days now since we spoke with them and they said it would be around 14 days...ALL the advisors we have spoken to over the past couple of years from the provider all say basically the same thing so lets see how things are when we here back from the provider shortly ( we hope).
What I will do as soon as we here from the provider I shall drop a reply back on here on this posting for you as both me and my wife are very grateful how you have put things across , best leave it there though as could say a lot more as you will already know!. just on a final though I remember some years ago when I was working in Australia attached to a company , that time the Aussie Prime minister had a very popular saying ( life wasn't meant to be easy!) I wonder if he was really meaning this wonderful world of pensions etc!...will drop a line as soon as we hear something...thanks ..Biker77..