Section 32 / BUY OUT Pension

[Kateykrunch]

Recently been looking at my private pensions with a view to taking the lump sum as they are generally very small (I have 5), all in view of the changes to the rules coming in this April. I have understood the concept apart from when I enquired about my largest 'pot' and was told the rules are still unclear on this particular pension as it is a little different....it is what is called...a Section 32 or Buy Out Pension, the most recent information I have gleaned is that it may be allowed to take this sort of pension as a lump sum under the 'small pot' rules. Is anyone else in the same boat?, have you been able to fully understand the rules, would you care to share the info as any additional pieces of detail would be helpful. Many thanks x

[Tess]

The rules are changing in April to allow members to potentially claim their pension benefits as a lump sum from age 55 instead of 60. They have to satisfy several criteria however the general rules are that you must claim any trivial commutation payments within one 12 month period, and that the total must not exceed £30,000 (including any other pension benefits). Alternatively you may be able to claim anything under a certain amount as a "de minimis" payment but I can't actually remember the amount. This means that your other pension pots are not taken into consideration when taking into this.

 

That said - buy outs/Section 32 pots aren't my speciality!

[Anna B]

I understand their is a major tax grab on these lump sums, so be very careful.

[Allen]

I understand their is a major tax grab on these lump sums, so be very careful.

When you paid into the pension scheme the payment was deducted from wages/salary before tax....

Anna is correct...the tax becomes payable on the lump sum.

[misspedantic]

Your first call should be to the provider of your section 32 pension. the provider should be able to tell you the value of the fund. If I understand correctly there will be an element of that which would define a GMP guaranteed minimum pension.

Depending on how well the fund has done will govern whether you will be able to access the provision in the new legislation.

The need to provide a GMP can restrict transferability.