Section 32 Buy-out Policies

Buyout policies were introduced in the early 1980s under the Finance Act 1981. They were superseded by personal pensions when these were introduced in April 1988, but you may continue to hold a buyout policy.

Buyout policies were individual contacts between you, the member and the pension provider, the pension provider is usually an insurance company.  These types of plans were used by both employers and workers to transfer pension benefits built up in workplace pensions, usually after the worker had left employment or if the scheme was winding up.

These are special schemes as they were able to receive transfers including contracted out benefits known asGuaranteed Minimum Pensions (GMP), these represented pension income that you would have received from the State Earnings Related Pension Scheme (SERPS) had you not contracted out.  There is a requirement upon these types of schemes to pay out at least the GMP at retirement or the provider would have to make up any shortfall in the policy.
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For this reason, they are often used to tap into frozen or existing company pensions. You need to ask them for the full transfer value from those running the pension scheme you want to transfer out of, or you can get an independent advisor specialising in pensions to ask for the transfer values of any schemes you want to move and to organise it all for you.

These are sometimes referred to as pension transfer plans.

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