The following Pensions practice note produced in partnership with Wyn Derbyshire of gunnercooke LLP provides comprehensive and up to date legal information covering:
A term which may be often heard within the pensions arena is that of the ‘section 32 buy-out policy’—also sometimes referred to as a section 32 policy or pension buy-out bond. It is a type of buy-out policy whose name derives from the legislation which originally applied in respect of such policies, namely section 32 of the Finance Act 1981 (FA 1981), and which has now been repealed. Section 32 buy-out policies were very popular before 1988 (ie before personal pension schemes were introduced).
Like other buy-out policies, a section 32 buy-out policy is a deferred annuity contract. It is bought from an insurance company and, as the name suggests, is used to ‘buy out’ a member’s deferred benefit entitlements (including, where applicable, deferred contracted-out benefits) held under a pension scheme, so that the benefits are transferred from the scheme to be held under the policy.
Section 32 buy-out policy are ‘one member’ arrangements. The policy will be distinct from the pension scheme which originally held the member’s benefit entitlement and is designed to pay the transferred benefits to, or in respect of, the member at some date in the future. The benefits will always be deferred at the date the policy is acquired. Following
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