Understanding a Section 32 Buyout Policy

davethebb

I have a AEGON section 32 buyout which I believe I was transfer to from an old company pension in the early 90's. I was hoping somebody to help explain to me what this is and more importantly what I should do with it. In summary I am 54 and hope to retire in the next 12 to 24 months currently with a £500k SIPP, £300k ISA and£150k cash/gen. investments.
My Sect. 32 has a value of £21480  (reserved funds - WP endowment £7865, non reserved £9529 and terminal bonus of £4085 with a GMP of £3160 at 65. what, if anything should I do with this?

xylophone

https://www.financialadvice.net/s32_buy_out_plan/zone/1288

xylophone

https://forums.moneysavingexpert.com/discussion/5126700/non-reserve-pot-advice may also be of interest.

Have you obtained a State Pension Forecast?

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

davethebb

Thanks Xylophone. My State pension will be £8575 in 2033. I have started to read the threads and digest but it may take a while. One question that comes to mind is if the sect 32 goes toward your LTA at any time?

xylophone

My State pension will be £8575 in 2033. 

What exactly does your Forecast say?

LTA at any time?

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-lifetime-allowance

The Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an extra tax charge.

xylophone

And with regard to the S32,
https://www.financialadvice.net/s32_buy_out_plan/zone/1288

What is an S32 Buy Out Plan?

S32 Buy Out Plan is a pension transfer plan scheme where a company pension scheme is transferred to a scheme in the name of the individual member by the trustees of the employer’s pension scheme.  It is a company scheme transfer plan.

davethebb

Xylophone, I have two state pension quotes. The first in 2016 states I have 34 qualifying years and a pension of £146.93 wk plus a contracting out pension equiv. of £49.30wk. In 2018 I checked and it reported £164.35wk/£714.63month/£8,575yr. How does this effect the section 32?

xylophone

How does this effect the section 32?

It doesn't - it is more that the existence of the GMP affected the calculation of your "starting amount" for New State Pension.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

At 6/4/2016, two calculations were done.

£119. 30 (Full Basic State Pension because you had 30+ years NI) + (Additional State Pension - Deduction for Contracting Out).

34/35 x £155.65 (Full NSP) - Contracted Out Pension Equivalent.

Your "starting amount" (called Foundation Amount in the link) was the higher of the two.

Your "starting amount" was less than a full NSP and you had a number of years before you would reach State Pension Age - succeeding NI years would improve your pension up to (but not beyond) a full NSP.

See  https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

xylophone

My State pension will be £8575 in 2033.

Don't forget that the State Pension is inflation protected, currently under the "Triple Lock".
https://www.which.co.uk/news/2020/09/government-confirms-triple-lock-boost-in-2021-how-much-state-pension-could-you-get/