Understanding Section 32 buyout options

balbs

I have a section 32 buyout policy with Phoenix, latest given transfer value is £70,000 and there is a £26000 cash GMP figure on the policy - but GAR specifically not :-(

The policy starts in two years time @65 and according to Phoenix would provide a £1100 a year pension (very little of that is index linked).

Ive read a few posts about how the rules work about transfers with Section 32 but cant quite get my head around it... any insight would be welcome as I am starting to plan early retirement - lucky this is only one of my pots but its the one I'm unsure about my options - I presume Phoenix will tell me @65 but it would be nice to know beforehand! Thanks

SonOf

Ive read a few posts about how the rules work about transfers with Section 32 but cant quite get my head around it..

GMP is a safeguarded benefit so you would need an adviser with pension transfer specialist permissions to be able to transfer it.

xylophone

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

Circumstances in which advice is required
Section 48 of the Pension Schemes Act 2015 and regulations made under it require pension scheme members who have subsisting rights in respect of safeguarded benefits worth more than £30,000 under the scheme to take appropriate independent advice from an FCA authorised adviser before:
• converting safeguarded benefits into flexible benefits (or in the case of benefits which are both safeguarded and flexible, into different flexible benefits)
• using a transfer payment in respect of safeguarded benefits to acquire flexible benefits under another scheme
• being paid an “uncrystallised funds pension lump sum” (UFPLS) in respect of their safeguarded benefits.

Pension benefits which represent, or include, a GMP are therefore safeguarded benefits.

Buy-out policies (including Section 32 policies)
Where a member’s accrued benefits under an occupational pension scheme have been “bought out” (i.e. the scheme’s liability has been discharged by the purchase of a deferred annuity or insurance policy), the benefits under the contract or policy will be safeguarded if an amount of pension income is secured, or if a liability in respect of contracted out rights (such as a Guaranteed Minimum Pension) has transferred under the contract or policy to the provider, or if the terms of the contract or policy otherwise include a guarantee about an amount of pension income or a rate of conversion into an income.

balbs

Firstly thanks for pointing me to those paragraphs... it appears that under paragraph one the 'subsisting rights' amount has to be over £30k before advice is required - is that the GMP figure or the potential transfer value? The paragraph below from the rules is the main bit Im confused about.. its the exception to the transfer rules..I think what it means in my case is that I am allowed to transfer some of the money but only after leaving enough money to fund the guaranteed pension amount. Am I correct?



However, there may be cases where liability for such contracted-out rights has been transferred from an occupational pension scheme under a buy-out policy and the member’s fund under the policy is greater than the amount needed to provide the required minimum level of pension. In that case, if there are excess funds remaining after a pension at that level has been secured, the member’s remaining benefits under the policy may be money purchase or cash balance benefits(and therefore not safeguarded), if there is no other income guarantee attached to them

xylophone

It seems to me (check with Phoenix of course) that the advice of a Pension Transfer Specialist would be required because of the fact that this would count as a transfer of a DB pension with benefits valued at well over £30,000.

See also this

https://www.financialadvice.net/s32_buy_out_plan/zone/1

and
https://www.thisismoney.co.uk/money/pensions/article-3680749/I-want-pension-freedom-trapped-section-32-buyout-plan.html


Have you contacted Phoenix to check that the value of your S32 fund is enough to cover the GMP in payment?