Maximum Pension in a S32 Policy ?

worn_out

I have been on to my insurer about why my Section32 Policy not only has a GMP (good) but also a Maximum amount payable written in to the Policy wording. It states how it is calculated, and that it is the most that the policy will ever pay out, and that if the Policy returns are actually higher than this Maximum, then the surplus would be returned back to my previous employers.

The reply from my insurer was "[FONT=&quot]Both the GMP and the maximum pension referred to were calculated based on what were considered reasonable possible returns between the start of your plan and your retirement date.."

Yes, but why were these written into the Policy as absolute maximums ?

Surely there would have been NO maximum return, would there ? (subject the investment conditions of course)..
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worn_out

Okay, I have absolute confirmation now that Norwich Union built in a maximum amount I could yield from my S32 policy.

Yet when they were quoting me back in 1987 they told me returns 'could be' over £15,000pa ..but this was clearly wrong, because the most they were ever going to pay was the maximum of £6,625.

Even in 1995 when I was thinking of transferring the policy to my new employers DB scheme Norwich Union were quoting me £12,600 potential pension...again, clearly wrong.

Now if I take myself back to 1987,when I received the estimates and decided to buy the policy, I have to think that if I was told the maximum was £6.625 and NOT a potential £15,600, or a £12,500..what decision would I have made ?

Well, I wouldn't have bought the policy would I..why would I ?

I might have chosen one of the other 2 quotes I received at the time, or I might have left it in my company DB scheme...

The question though...have I lost anything...? This was my GMP ..so could I have expected anyone to pay more than the GMP elsewhere, under different management..or could I have had a larger lump sum from my company scheme had it remained there ?

aajamilkhan

It states how it is calculated, and that it is the most that the policy will ever pay out, and that if the Policy returns are actually higher than this Maximum,

woolly_wombat

Dear worn out.

You have a GMP which probably didn't appear to be worth much back in the high inflation 80s era but has turned out to be very valuable in our current low inflation age.

As dunstonh has already tried to explain, Aviva will bear the loss on this, not you.

Please can you just celebrate your good fortune and let the matter drop, or you will, dare I say it......wear yourself out.

All the best.

WW

worn_out

woolly_wombat wrote: »

Dear worn out.

You have a GMP which probably didn't appear to be worth much back in the high inflation 80s era but has turned out to be very valuable in our current low inflation age.

As dunstonh has already tried to explain, Aviva will bear the loss on this, not you.

Please can you just celebrate your good fortune and let the matter drop, or you will, dare I say it......wear yourself out.

All the best.

WW

I think the issues are a bit less simplistic than that tbh,but thank you for your opinion.

woolly_wombat

worn_out wrote: »

The question though...have I lost anything...? This was my GMP ..so could I have expected anyone to pay more than the GMP elsewhere, under different management..or could I have had a larger lump sum from my company scheme had it remained there ?

No.

Back in 1987 Norwich Union et al probably thought they could make a shed load of money on these policies and still deliver you more than the GMP.

Things haven't quite worked out like that but Aviva still have to stump up thanks to that (as it turns out) valuable guaranteed minimum pension.

See:
http://www.pruadviser.co.uk/content/knowledge/technical-centre/section_32/#1

WW

worn_out

woolly_wombat wrote: »

No.

Back in 1987 Norwich Union et al probably thought they could make a shed load of money on these policies and still deliver you more than the GMP.

Things haven't quite worked out like that but Aviva still have to stump up thanks to that (as it turns out) valuable guaranteed minimum pension.

See:
http://www.pruadviser.co.uk/content/knowledge/technical-centre/section_32/#1

WW

okay, Aviva have confirmed that when the GMP was sold there were both minimum and maximum limits applied to it.
They state my former employer advised of the maximum.
I guess as it was only the GMP I transferred this might have been the upper earnings limit element of SERPS which is used when you get your pension statement from DWP..anyway..a side issue.

So Aviva now say that despite the maximum, which they accept now is a restriction, there is the open market option..and by this method you could receive unlimited amounts of money subject of course to the returns on the investment. So their argument now is that while Aviva could never have paid these illustrated returns themselves, somebody else would have been able to......but i'd have to take the open market option first.

The trouble with what they have said there is that 2 clauses in the policy clearly state that all the aggregated pensions, either with Aviva or with a 3rd party CAN NOT when added together exceed the maximum. So despite the open market option, there is still a restriction written into the policy limiting all payments to the maximum.

To clarify the issue, it is not about GMP or even the poor returns, it is about what was said to me right back at the time the policy was quoted and then sold to me...