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  • FIRST POST
    • Revcounter
    • By Revcounter 18th Jun 19, 10:03 AM
    • 2Posts
    • 0Thanks
    Revcounter
    Transfer to Annuity Blocked
    • #1
    • 18th Jun 19, 10:03 AM
    Transfer to Annuity Blocked 18th Jun 19 at 10:03 AM
    I have a pension with Aegon who are tied to Legal and General for the Annuity plans.

    I need to transfer the pension to an Annuity and as recommended I have 'shopped around' and have found an annuity provider which will pay considerably more than L&G.

    However, Aegon have blocked the transfer request:

    "We've considered your request to transfer the GMP benefits in accordance with regulations made under section 97 of the Pension Schemes Act 1993.
    The GMP must meet a statutory requirement set by the Government, that
    the transfer value must be at least the cash equivalent value of the GMP".

    It seems they will only transfer my pension to L&G to whom they will only pay the shortfall.

    "Any shortfall in providing the GMP at age 65 for males and 60 for females will be paid by Aegon if you buy an annuity from our arrangement with Legal & General".

    Is there any way to avoid this and still use the 'open market'?
Page 1
    • xylophone
    • By xylophone 18th Jun 19, 10:25 AM
    • 30,184 Posts
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    xylophone
    • #2
    • 18th Jun 19, 10:25 AM
    • #2
    • 18th Jun 19, 10:25 AM
    Do you have a S32 policy?

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

    GMP Shortfall - What if S32 Buy Out Returns are low?

    If investment returns or bonuses are poor, there may not be enough money in the fund to fund/cover/pay for the increased/adjusted GMP pension.
    If this is the case, the S32 Buy Out Provider is unlikely to allow you to transfer the S32 pension elsewhere
    They will stand the loss and make up the shortfall.

    In these cases, it may mean that you lose some or all of any normal pension benefit your transferred inside the S32 as these may be used to help with any GMP shortfall.


    https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/section-32/

    Providing GMP
    The Section 32 must guarantee to pay at least the GMP from the previous scheme at age 60/65 (due to the way the legislation is written, even though State Pension age is increasing, the age for GMP stays at 60 for females and 65 for males).

    The Section 32 provider must make up any shortfall to pay the GMP amount due.

    As such, if the fund value doesn’t cover the GMP revalued to age 60/65, transfer and early retirement can be prevented.


    https://www.aegon.co.uk/support/faq/pension-technical/different-types-of-pension-schemes.html

    https://www.thisismoney.co.uk/money/pensions/article-3680749/I-want-pension-freedom-trapped-section-32-buyout-plan.html
    • wjr4
    • By wjr4 18th Jun 19, 11:18 AM
    • 558 Posts
    • 384 Thanks
    wjr4
    • #3
    • 18th Jun 19, 11:18 AM
    • #3
    • 18th Jun 19, 11:18 AM
    "Any shortfall in providing the GMP at age 65 for males and 60 for females will be paid by Aegon if you buy an annuity from our arrangement with Legal & General".

    Is there any way to avoid this and still use the 'open market'?
    Originally posted by Revcounter
    Aegon have to pay the Guaranteed Minimum Pension therefore the annuity must be with L&G.
    • AnotherJoe
    • By AnotherJoe 18th Jun 19, 12:51 PM
    • 14,939 Posts
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    AnotherJoe
    • #4
    • 18th Jun 19, 12:51 PM
    • #4
    • 18th Jun 19, 12:51 PM
    Can OP transfer it to L&G get an uplift and then get a whole of market quote?
    Seems crazy that the GMP is lower than he can get elsewhere when he's meant to be "protected".
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • xylophone
    • By xylophone 18th Jun 19, 2:34 PM
    • 30,184 Posts
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    xylophone
    • #5
    • 18th Jun 19, 2:34 PM
    • #5
    • 18th Jun 19, 2:34 PM
    If this is a S32, it must meet the GMP obligation.

    There is a shortfall on the policy. Where this is the case, transfer can be prevented - the insurer will stand the loss and meet the GMP.


    Aegon are no longer in the annuity market so have an arrangement with L&G whereby the obligation can be met.

    Presumably they are unwilling to pay the CETV of the GMP to another pension provider?
    • coyrls
    • By coyrls 18th Jun 19, 5:46 PM
    • 1,193 Posts
    • 1,295 Thanks
    coyrls
    • #6
    • 18th Jun 19, 5:46 PM
    • #6
    • 18th Jun 19, 5:46 PM
    Wouldn't it be possible to transfer all but the GMP element to another provide and take the GMP from L&G? I suspect the comparison was done on the total transfer amount. It is quite likely transferring only the non-GMP element and retaining the GMP with L&G will give an even better outcome.
    • xylophone
    • By xylophone 18th Jun 19, 6:18 PM
    • 30,184 Posts
    • 18,489 Thanks
    xylophone
    • #7
    • 18th Jun 19, 6:18 PM
    • #7
    • 18th Jun 19, 6:18 PM
    Wouldn't it be possible to transfer all but the GMP element to another provide and take the GMP from L&G? I suspect the comparison was done on the total transfer amount. It is quite likely transferring only the non-GMP element and retaining the GMP with L&G will give an even better outcome.
    It's not impossible that the overall value is not high enough to meet the GMP?
    • coyrls
    • By coyrls 18th Jun 19, 10:49 PM
    • 1,193 Posts
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    coyrls
    • #8
    • 18th Jun 19, 10:49 PM
    • #8
    • 18th Jun 19, 10:49 PM
    It's not impossible that the overall value is not high enough to meet the GMP?
    Originally posted by xylophone
    If so, I wouldn't have thought it would have been possible to get a better annuity quote than the GMP.
    • xylophone
    • By xylophone 18th Jun 19, 11:31 PM
    • 30,184 Posts
    • 18,489 Thanks
    xylophone
    • #9
    • 18th Jun 19, 11:31 PM
    • #9
    • 18th Jun 19, 11:31 PM
    I think that some policies were set up on the basis that "non reserved units" could be used to support the GMP (reserved) units if there were a shortfall.

    I suppose it could be possible that the value of the non reserved units plus the reserved units was still not high enough to meet the GMP?

    See https://www.pensions-ombudsman.org.uk/determinations/2018/po-18261/aegon-section-32-buyout-policy/
    • parcival
    • By parcival 19th Jun 19, 9:58 AM
    • 503 Posts
    • 296 Thanks
    parcival
    My wife had a similar situation with an occupational pension. Her GMP was higher than even the best annuity quote especially as she got it paid at age 60........
    Would have been daft to even consider a transfer which I suspect would have been blocked.
    • Revcounter
    • By Revcounter 19th Jun 19, 10:26 AM
    • 2 Posts
    • 0 Thanks
    Revcounter
    Thanks
    Many thanks for all your very helpful replies:

    Xylophone - I don't have a S32 Policy. The links you gave me are extremely helpful. It seems that the spirit of GMP is a form of protection when compared with some of the possible risks of the 'Open Market'.

    wjr4 - It looks like you may well be right and that I'm tied to Aegon/L&G.

    AnotherJoe - Your question 'Can OP transfer it to L&G get an uplift and then get a whole of market quote?' I'm currently exploring this idea, but being realistic I suspect it would be blocked. Reminds me of when you call your motor insurance provider as a new customer and get a much lower quote than you've paid them for years.

    coyrls - The overall value won't cover the GMP. My 'better' Annuity quote would have paid me more, but there were a few strings attached which I was prepared to accept. I guess one could argue that goes against the spirit of GMP.
    • xylophone
    • By xylophone 19th Jun 19, 10:38 AM
    • 30,184 Posts
    • 18,489 Thanks
    xylophone
    Xylophone - I don't have a S32 Policy.
    This is interesting - what exactly do you have?
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