Section 32 buyout

Starnan2000

I have a section 32 buyout plan GMP how can I get access to it,   can I transfer  it,  and have 25% tax free and benefit from a more flexible plan,  I was put on this plan back in the 80s basically my army pension was transferd  to this plan and it was not explained properly by the advisor  long story,   

Marcon

Starnan2000 said:

I have a section 32 buyout plan GMP how can I get access to it,   can I transfer  it,  and have 25% tax free and benefit from a more flexible plan,  I was put on this plan back in the 80s basically my army pension was transferd  to this plan and it was not explained properly by the advisor  long story,   

You may be able to transfer it, but there can be issues with a S32 buyout if your S32 plan does not have enough money to meet certain levels of benefit promised at the time of the original buyout. Only way to know is to ask the provider. Be aware that you could be giving up valuable guarantees by doing so.

If you want more 'technical' detail (although you don't need it!), try looking at https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/section-32/ or https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/transferring-a-section-32-pension/

xylophone

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

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf      see p4.

dunstonh

can I transfer  it,  and have 25% tax free and benefit from a more flexible plan, 

The simple answer is yes.    However, it may not be simple and it may not be the best option.

What is the value?

What is the GMP?

Is there any GARs on the plan (often is with S32 buyout bonds)

basically my army pension was transferd  to this plan and it was not explained properly by the advisor  long story,   

Whilst that almost certainly wasn't a good move, with hindsight, it does appear that you "could" be doing something similar again without realising. 

Marcon

dunstonh said:

can I transfer  it,  and have 25% tax free and benefit from a more flexible plan, 

The simple answer is yes.    

Actually it isn't - it could be no if the GMP isn't covered. See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/section-32/ and scroll down to the section headed 'Providing GMP'. I've seen more than one S32 provider refuse to make up the shortfall, thus preventing a transfer.

dunstonh

Marcon said:

dunstonh said:

can I transfer  it,  and have 25% tax free and benefit from a more flexible plan, 

The simple answer is yes.    

Actually it isn't - it could be no if the GMP isn't covered. See https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/section-32/ and scroll down to the section headed 'Providing GMP'. I've seen more than one S32 provider refuse to make up the shortfall, thus preventing a transfer.

Covering the GMP is only a requirement if you want to retain the GMP.   The GMP can be forfeited.      

xylophone

Covering the GMP is only a requirement if you want to retain the GMP.   The GMP can be forfeited.      

https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/transferring-a-section-32-pension/

That means, if your section 32 pension still doesn’t have enough funds to cover the SERPS-linked GMP, then your current provider may not permit a transfer because you must still receive the guaranteed pension amount and they cannot pass a pension with a shortfall onto a different provider.

https://techzone.adviserzone.com/anon/public/pensions/Tech-guide-guaranteed-min-pen

Section 32 buy out contracts are usually money purchase arrangements, but can hold a GMP liability. When looking to transfer from these, the scheme will check that the transfer value they offer is sufficient to cover the GMP amount, and if it doesn't, the transfer is not normally possible. This would be the case even where the receiving scheme is not contracted out and the GMP liability would effectively disappear.

If a transfer is prohibited because the value is less than the GMP liability, then the fund will have to stay within the section 32 until it increases to the point where a transfer is allowed. But this may never happen, and the section 32 will have to meet the GMP liability themselves when paying out the benefits.

https://connect.avivab2b.co.uk/adviser/articles/tech-centre/pensions-planning/pre-retirement-accumulation/section-32-arrangements-GMPs-and-transferring/

Is the fund sufficient to meet the GMP at State pension age?

• If not, then the existing provider must make up the shortfall so an OMO is probably unrealistic and a transfer to a personal pension would not be possible.  The provider must refuse to agree to a transfer to a personal pension if it’s not possible to provide a transfer value that is at least equal to the value of the GMP 
• 
  
• https://www.thisismoney.co.uk/money/pensions/article-3680749/I-want-pension-freedom-trapped-section-32-buyout-plan.html

Croeso69

xylophone said:

Covering the GMP is only a requirement if you want to retain the GMP.   The GMP can be forfeited.      

https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/transferring-a-section-32-pension/

That means, if your section 32 pension still doesn’t have enough funds to cover the SERPS-linked GMP, then your current provider may not permit a transfer because you must still receive the guaranteed pension amount and they cannot pass a pension with a shortfall onto a different provider.

https://techzone.adviserzone.com/anon/public/pensions/Tech-guide-guaranteed-min-pen

Section 32 buy out contracts are usually money purchase arrangements, but can hold a GMP liability. When looking to transfer from these, the scheme will check that the transfer value they offer is sufficient to cover the GMP amount, and if it doesn't, the transfer is not normally possible. This would be the case even where the receiving scheme is not contracted out and the GMP liability would effectively disappear.

If a transfer is prohibited because the value is less than the GMP liability, then the fund will have to stay within the section 32 until it increases to the point where a transfer is allowed. But this may never happen, and the section 32 will have to meet the GMP liability themselves when paying out the benefits.

https://connect.avivab2b.co.uk/adviser/articles/tech-centre/pensions-planning/pre-retirement-accumulation/section-32-arrangements-GMPs-and-transferring/

Is the fund sufficient to meet the GMP at State pension age?

• If not, then the existing provider must make up the shortfall so an OMO is probably unrealistic and a transfer to a personal pension would not be possible.  The provider must refuse to agree to a transfer to a personal pension if it’s not possible to provide a transfer value that is at least equal to the value of the GMP 
• 
  
• https://www.thisismoney.co.uk/money/pensions/article-3680749/I-want-pension-freedom-trapped-section-32-buyout-plan.html

I am pretty sure that @dunstonh is correct and you can give up your GMP rights for normal rights (for want of a better word) and then transfer elsewhere. If the GMP is not covered it may not be a good idea as you are losing value by doing so.

However google seems to be silent on this which is a bit odd.

xylophone

I am pretty sure that @dunstonh is correct and you can give up your GMP rights for normal rights (for want of a better word) and then transfer elsewhere. If the GMP is not covered it may not be a good idea as you are losing value by doing so.

The poster  Bob https://forums.moneysavingexpert.com/discussion/comment/66536250/#Comment_66536250

was able to transfer  out his S32 because  the provider (NPI)  was able to confirm that his transfer value was greater than the amount needed to provide the GMP.

https://forums.moneysavingexpert.com/discussion/4916250/section-32-bond/p1

"By law,a transfer can only take place if the company`s actuaries can certify that the transfer value available is greater than the amount needed,on a prescribed basis,to provide the Guaranteed Minimum Pension liabilty held under your plan.This amount is known as the cash equivalent transfer value (CETV )
The CETV calculation has been done and and the value is lower than the transfer value on the policy,therefore a transfer of benefits is allowed".