help needed with old buy out 32 policy

keaskin

My husband was made redundant in 1985 and his pension was frozen, in 1986 he did an option 32 buy out and his lump sum was put in a sun alliance transfer plan. He has received bonuses averaging 900 pounds each year until 2002 when it dropped to 40 pounds and the same amount for the next two bonuses.

We thought this low bonus was because of stock market falls then we read an article in local paper of someone in similar position and they were told that sun alliance had sold these policies to resouloution life group and that it was a zombie fund and they should take there money out.

There is now including bonuses approx 40,000 in this fund which is payed in eight years on retirement at sixty five, as my husband is hoping to take early retirement from his present work at sixty and then work part time. So we are unsure what to do with this policy

A close this policy and put the 25% in bank and get an annuity if so what kind if percentage approx or penalty will we lose on final sum due to finishing eight years early.

B take it all out and put in another pension scheme.

C take it out and put in present works final salary scheme if they allow this.

D can we take it all out and put in high interest bank account as i am a non taxpayer and would earn a lot more than forty pounds a year in interest.

E any suggestions, help or advice of other options.

With the last statement we got a booklet ( with the name sun alliance on it) and it sayes they may pay a terminal bonus of 6% ten years since issue and 11% twenty years since issue don’t know if this is on original capital or total capital now including bonuses ( 40,000 ), as it will be twenty years in april next year should we wait before we do anything or will we not get this bonus if we close before original term

I would appreciate any help with this as we don’t know anyone who as used a IFA so cant get a reccomendation of one in area we live.

EdInvestor

Hi keaskin

You can move this pension before retirement and you can also take benefits from it of you want to from aged 50. You would need to convert it to a personal pension to do this probably, but this may not be a good idea.

A section 32 buyout often contains two pensions in fact - your company pension and the "contracted out" protected rights part - usually much the smaller bit. This latter bit was subject to different rules, but from April next year it will come into line with normal personal pension rules.

It sounds as though this pension is invested in the With profits fund and if it is in R&SA then indeed it's now gone off to zombie land.

This may not be a bad thing.You need to check any guarantees you might have on the policy - particularly any guaranteed annuity rate - if you have one of these you could get as much as double the normal pension when your husband retires and it would be a bad thing to move it.

You could check also if you can move some or all of the money to a different fund within the provider's system which will perform better.

You really need a properly qualified IFA to investigate the policy IMHO - paid a fee not commission, so he's not tempted to sell you anything.These policies are really quite complicated and you can easily lose money if you try to DIY.

I would suggest you consider getting some advice from one of the specialist annuity IFAs such as

https://www.annuity-bureau.co.uk

...who can also advise you on other options such as income drawdown, which may be a better plan under the new rules next year.ID is an alternative to an annuity where you get the tax free cash out and invest it, but keep the capital, leaving it also invested until you need it, without taking an income.

A low-cost SIPP such as https://www.sippdeal.co.uk with no annual charge would be a good place to park this money for the time being, if that's what you decide on. You can invest the money in shares or unit trusts or just leave it in cash to grow tax free until you retire.

dunstonh

We thought this low bonus was because of stock market falls then we read an article in local paper of someone in similar position and they were told that sun alliance had sold these policies to resouloution life group and that it was a zombie fund and they should take there money out.

Phoenix Life Group is the current name for the company that bought R&SA life. Its not as easy to say get out as there may be alternative in house options that could offer better terms.

You can move this pension before retirement and you can also take benefits from it of you want to from aged 50. You would need to convert it to a personal pension to do this probably, but this may not be a good idea.

It may not be able to be commenced early from the S32. If you want it early, it may need transferring to a personal pension to commence and that will almost certainly mean lesser terms than leaving it in the S32.

A close this policy and put the 25% in bank and get an annuity if so what kind if percentage approx or penalty will we lose on final sum due to finishing eight years early

You may not be able to do this with the S32. The tax free lump may be lower or higher than 25%. It may also have valuable guaranteed built into it which may not be allowed early or lost if transferred.

B take it all out and put in another pension scheme.

Possible but the odds are that its probably better not best to.

C take it out and put in present works final salary scheme if they allow this.

Possible but the benefits may not be as good.

D can we take it all out and put in high interest bank account as i am a non taxpayer and would earn a lot more than forty pounds a year in interest.

No. Plus, it may not be earning just £40 a year.

E any suggestions, help or advice of other options.

Not without seeing the policy. However, it may have a high proportion of Guarantees which may make the actual bonuses pointless. The idea being that it would pay out a minimum of X amount or a higher amount if it made enough.

You really need a properly qualified IFA to investigate the policy IMHO - paid a fee not commission, so he's not tempted to sell you anything.These policies are really quite complicated and you can easily lose money if you try to DIY.

Almost certainly would be fee based only as there is no business likely here anyway. Chances are (without knowing facts of course) that its best where it is.

...who can also advise you on other options such as income drawdown, which may be a better plan under the new rules next year.ID is an alternative to an annuity where you get the tax free cash out and invest it, but keep the capital, leaving it also invested until you need it, without taking an income.

Which only stands to confuse things at this stage.

A low-cost SIPP such as www.sippdeal.co.uk with no annual charge would be a good place to park this money for the time being, if that's what you decide on. You can invest the money in shares or unit trusts or just leave it in cash to grow tax free until you retire.

Without knowing the guarantee annuity rate or GMP on the pension that is way too premature.

Transferring S32s (before commencement) usually results in making lots of money with the alternative or the alternative being a heck of a lot worse.