Section 32 query

peterth125

I am due to retire in Dec 2014 at age 65. I have a small section 32 pension with a GMP of approx £2850 per year. Apparently the fund has not reached the amount needed to pay this GMP but I know they (co op ) will still have to honour the amount.


My question is would it be at all possible to forgo the GMP and agree on a lump sum and a smaller pension ?


I have asked the company but they cannot answer me until 8 weeks before my retirement date. Any comments would be appreciated.

dunstonh

My question is would it be at all possible to forgo the GMP and agree on a lump sum and a smaller pension ?

Yes. Although it will require you to transfer out of the Section 32 in most cases. Co-op will not be able to advise you on this. They are just waiting to see how far off you are closer to the time to see what their option is. They will not consider options that others have available.

PensionTech

Not usually unless you have less than a year to live. You could transfer out to a DC scheme, upon which your GMP just becomes normal benefits and you would then be able to take a 25% tax free lump sum and then buy an annuity (EDIT: or enter drawdown) with the rest (or wait until April to take it as a taxed lump sum), but I'm not sure if you'd have a statutory right to transfer. In any case it may well be a bad decision to try to convert your benefits to DC in this way, since your S32 benefits will almost certainly be more valuable than any transfer and subsequent annuity you might secure.

peterth125

Thank you for such a fast reply. It is good to know that the option is available as I do not really need the income as have several other pensions which I am already drawing plus my OAP starting in Dec.
Would I lose much by having to move it out of the section 32. I believe the value was £5510 in 1987 when it was opened

Your_Hero

peterth125 wrote: »

I am due to retire in Dec 2014 at age 65. I have a small section 32 pension with a GMP of approx £2850 per year. Apparently the fund has not reached the amount needed to pay this GMP but I know they (co op ) will still have to honour the amount.

My question is would it be at all possible to forgo the GMP and agree on a lump sum and a smaller pension ?

I have asked the company but they cannot answer me until 8 weeks before my retirement date. Any comments would be appreciated.

As there is a shortfall in funds to provide the GMP, it is likely that the Co-op may not let you transfer out. If there is still a shortfall by Dec 2014, they will make up for this shortfall and pay you the GMP, but you may find that you do not have any tax free cash.

dunstonh

It should be noted that the option to transfer will be based on a transfer value. Any increase that Co-op would have to make to meet the GMP would be lost. It will not increase the transfer value.

Would I lose much by having to move it out of the section 32. I believe the value was £5510 in 1987 when it was opened

It would need an analysis. Depending on the years of GMP, you would have indexation on the pension from the section 32 (or via the state pension). If you transferred out, you would lose that indexation on that part of the state pension (if applicable) or indexation via the co-op pension (if applicable) and any alternative you buy may or may not have indexation (but should be costed for comparison). However, it is unlikely to be near the Co-op figure. Theoretically possible but highly unlikely.

GMP is not a simple subject. You have to take a number of things into account. There are different years to consider where the rules are different. The guarantee within the GMP can be highly valuable in many cases.

I do not really need the income

But it may be the best option financially.

BIKER77

Hi Peterth125,


Just been reading with interest of your section 32, I was just wondering if you wouldn't mind disclosing what your fund value is now, thanks. As you mentioned £5510 was put in to the policy back in 1987.
Thanks..Biker77..

peterth125

Sorry have been trying to find the answer and all I can find out is my GMP is £2840 per annum. Thanks for your interest


Peter

xylophone

It would need an analysis. Depending on the years of GMP, you would have indexation on the pension from the section 32 (or via the state pension)

This seems to be all pre 88 GMP - the provider has no obligation to provide increases on this.

If the OP's COD is greater than the sum shown for pre 97 Additional State Pension on his State Pension Statement he won't receive any CPI indexation until the one equals the other.

BIKER77

Peterth125 wrote:




Sorry have been trying to find the answer and all I can find out is my GMP is £2840 per annum. Thanks for your interest


Peter


No worries Peter, we have quite a good bit of good information now to be going on with ...cheers....Biker77...

peterth125

I have received a letter today from the Co-op stating the fund is now worth £33093 and to start looking around at my options and deciding what to do. I have not got a clue what to do !!!!!!!!!


All I want is a lump sum and a small pension but have now read I may lose some of my additional state pension if I go down this route. Help please I am so confused