Section 32 policy payout not as great as expected

Mcgoverg

Hi,
I'm hoping someone might be able to give me an insight into why a S32 buyout plan is apparently paying out less than the GMP.

Policy was taken out in Aug '92 for an employment period from April 78 till May 87.

The GMP stated is £1917 revalued at 5% from Apr 1988 till April 2016. According to my calculation that is @ £7500 but I've been offered only £1918!

Is there something fundamental that I'm not understanding about S32?

I haven't contacted the provider yet, wanted to have some semblance of knowledge before entering into debate with them.

Thanks in advance for any clarity that can be provided.

Gerry

xylophone

You are sure that the GMP on leaving was not a small amount which has revalued to £1918?

It appears that "Limited Rate" revaluation was being used?

See https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

Another historic method is ‘limited rate revaluation’ where the increase is also linked to the rise in the National Average Earnings index over the period from a member’s date of leaving and retirement, but limited to a maximum 5% per annum over the whole period. A Limited Revaluation Premium was paid to NICO to reflect the difference between limited rate and full rate revaluation. Limited rate revaluation was abolished from 6 April 1997.

When did you/do you become eligible for State pension?

agarnett

Is your S32 provider Aviva?

Mcgoverg

Hi, no not Aviva, it's Phoenix Life

Mcgoverg

hi,
There is no specific mention of limited rate though I did wonder why the compound interest rate is set at 5 rather than 7.5% which is what is see set out in the tables.

In the wording of the policy it is not clear that the sum is inclusive of compound interest. It simply states

GMP
Member's guaranteed minimum pension = £1917

Revalued at 5% per annum compound at each 6th April from 6/4/1988 to 6/4/2016 inclusive.

Payment is from April 2017

Thanks

woolly_wombat

Mcgoverg wrote: »

Hi, no not Aviva, it's Phoenix Life

Ah Phoenix, one of the zombie-gobblers!
.

agarnett

If it is of any help in trying to work out GMP on leaving I can tell you I was in a contracted out occupational pension scheme over a similar period 1978-1988 and my total GMP on leaving was stated as ~£700pa with total GMP at state pension age of ~£7,600pa (having been revalued at a fixed rate 7.5%pa).

If it is of any use for comparison purposes, my starting salary was around £3,500 and leaving salary for scheme purposes set at around £15,000 (it was a period of high inflation and I was lucky to be promoted a few times). Mine was a middle of the road type first 10 year's career performance for an also ran STEM graduate from a good university in those days. If yours was better or worse than that then you might compare whether you think your GMP on leaving (a year earlier than I did) might actually have been as high as ~£1,900pa versus mine at ~£700pa.

NB Before you attempt a comparison, I am not sure if total GMP values as discussed above were pro-rata with salary / NI contributions paid. Xylophone may be able to put us straight on that.

Unlike you, I did not transfer out into an S32 and touch wood I might still reach scheme retirement date without the original DB scheme being wound up and without being invited/forced to transfer out like I was i.r.o. subsequent schemes with other employers!

I think xylophone is almost certainly right in detecting the type of revaluation that would explain your 5%pa revaluations - whether that method was fair for you or not is perhaps a further question. You haven't said why you transferred into an S32 arrangement five years after leaving that particular employment, or who sold it to you.

woolly_wombat wrote:

Ah Phoenix, one of the zombie-gobblers!

Yes indeed - Resolution and all that dodgy stuff. But S32's are all in funds pretty much run as zombie funds now, aren't they?

OP, what was the original S32 provider brand which put you within the currently named "Phoenix Life" book? Do you have all the paperwork (and I am sure they've produced reams of it over the years during various "restructurings"?)

xylophone

You can ask Phoenix to clarify the amount of GMP at the date of leaving contracted out employment.

It is this amount that revalues as described in the BW link.

It could be that your revalued GMP is £1918?

Have you obtained a new state pension statement?


https://www.gov.uk/check-state-pension