A Section 32 pension is a buy-out policy: an insurer took over your pension from an employer's scheme, sometimes with a guaranteed minimum pension inside.

If you have found a "Section 32" or "s32" plan among your papers, it is an insurance contract that now owes you what an old workplace scheme once did, and its own terms set your options. Pension Wise offers free, impartial, government-backed guidance to anyone aged 50 or over, so you can hear your choices before acting. A Section 32 is easier to judge with an FCA-authorised adviser at your elbow, and this page's short form is a free route to a call-back.

What is a Section 32 pension?

It is a contract with an insurance company that takes over pension rights from an employer's scheme and pays them later. MoneyHelper explains that when an employer's scheme is closing, an insurer might be paid to run the pension instead, and gives three names for the result: an individual buyout policy, a Section 32 (s32) pension buyout policy or a deferred annuity contract. Whichever name your papers use, the policy's own terms set what it pays and when.

How does a pension end up as a Section 32 buy-out?

In the case MoneyHelper describes first, through a decision made by the employer rather than by you. MoneyHelper explains that a buyout happens when an employer pays an insurance company to run and pay your pension so that it can close down an existing scheme. After that the insurer is responsible for paying your pension when you are old enough and want it.

You might also be able to arrange your own buyout policy, which MoneyHelper calls a deferred annuity contract: you use the value of your current pension to buy a future guaranteed income. It says this is usually only worth considering if you stop working for your employer, do not want to leave your pension where it is and do not want to transfer it to a different provider or scheme.

MoneyHelper adds that you usually cannot pay more into a buyout policy, though your existing rights are normally carried over, including the minimum age at which you can take the pension. The wider picture of what an older scheme promised is in final salary pensions.

Is a Section 32 a defined benefit pension or a personal pension?

It is neither exactly; what you hold depends on what was bought out. MoneyHelper says that if a defined benefit scheme is closing, your buyout policy will usually provide all the pension benefits you were promised. If a defined contribution scheme is closing, the insurer will usually continue to invest your money until you need it, so your retirement income depends on how well the investments perform, in the same way your existing scheme would have worked. Invested pensions can fall in value as well as rise.

Your policy documents or a statement from the provider will show which kind you hold, and that decides most of what follows. For the ordinary personal pension, see what a personal pension is; for how employers' schemes work, see workplace pension rules.

Where a plan's terms matter more than the general rules, this page's short form lets you ask an adviser for a free call-back.

What does a guaranteed minimum pension inside a Section 32 mean?

It means the insurer has promised a floor for part of your income. MoneyHelper says your policy might include a guaranteed minimum pension (GMP) if you worked between 1978 and 1997 and contracted out of the Additional State Pension, often called SERPS. It is usually paid from age 60 for women and 65 for men, and normally provides an income to a spouse or civil partner if you die before them.

Three other guides take the GMP further: what a GMP is, how to find yours, and why schemes wrote to members about equalisation. Seeing a GMP figure and wondering what it limits? This page's short form asks an adviser to ring you, free.

What happens to a Section 32 pension at retirement?

What you can take depends on what was bought out and on the policy's own terms, not on the full menu you may have heard about. For a buyout of a defined contribution scheme, MoneyHelper says you can usually choose how to take your money, including up to 25% as a tax-free lump sum and turning the rest into guaranteed income.

A GMP can limit that. MoneyHelper warns that if a policy includes a GMP but the scheme does not have enough money to pay it, you might not be able to take a tax-free lump sum.

Whether your own plan offers cash, drawdown or only an income is set by its terms, and an adviser can talk you through yours free. Pension Wise is the place for a first look at the options at retirement.

Can you cash in or transfer a Section 32 pension?

Sometimes, but the GMP can stand in the way. ReAssure says GMP benefits cannot be taken early unless the pension pot is already large enough to cover the cost of providing the pension, and a pot cannot be moved to another provider unless the transfer value also covers the cost of the GMP.

Moving has costs of its own. The same ReAssure page adds that when GMP rights go to another provider, the new provider has no obligation to provide benefits on the same basis. A protected pension age, the kind that allowed benefits before 55, can go too. HMRC's Pensions Tax Manual (PTM062240) keeps one on a transfer only in limited cases, one being a block transfer, and says a Section 32 cannot normally make a block transfer because it has only one member; the minimum pension age guide covers the wider rule. Where the plan holds promised benefits, the FCA says: "The FCA and The Pensions Regulator (TPR) believe it's in most people's best interests to keep their DB pension." It adds that you can't reverse a transfer. This is a general statement about defined benefit pensions, not a ruling on your plan.

The advice rule when the value is over £30,000

ReAssure counts deferred annuities where contributions buy an income, guaranteed annuity rates and GMPs among "safeguarded benefits". The regulation says trustees or managers need not carry out the advice check "if the transfer value of the member's or survivor's subsisting rights in respect of safeguarded benefits under the pension scheme is £30,000 or less on the valuation date" (SI 2015/742, regulation 5, in this form from 6 April 2018). Above £30,000 that exception does not apply.

ReAssure describes the effect on its customers: if the current value of the policy is more than £30,000, the government requires professional advice from a regulated financial adviser, and the provider needs proof before it proceeds. At £30,000 or less it strongly recommends advice, though that is not compulsory. It also says the value is usually the policy value on the day of the chosen option, and that a value that rises above £30,000 at that point brings the requirement in. The wider rule is in the transfer advice requirement, the people qualified to give it are in pension transfer specialists, and the mechanics are in how to transfer a pension.

Beware anyone urging a quick move of a pension; the FCA's warnings on pension scams are summarised in our scams guide.

Aegon, Aviva and Scottish Widows Section 32 plans

A Section 32 plan with any of these insurers, or with another, carries its own terms. Ask the provider for the policy documents and a current statement, then look for four things: whether a GMP is held and how much, whether early access is restricted, what tax-free cash applies, and whether any guaranteed annuity rate is attached (see guaranteed annuity rates). If you cannot tell which company now holds the plan, finding a lost pension covers tracing.

Once the plan is found, an adviser can read its terms with you, and the form here arranges that call free.

Section 32 pension questions

What is a buy-out bond pension?

If your papers call the plan a buy-out bond, ask the provider to confirm whether it is a Section 32 buyout policy, the arrangement MoneyHelper also calls an individual buyout policy or a deferred annuity contract. Quote the name printed on your own policy documents when you contact it.

Can I pay more into a Section 32?

Usually not. MoneyHelper says you usually cannot pay any more into a buyout policy. For saving more, look at a personal pension or your workplace scheme.

Will a Section 32 pay my spouse if I die?

A GMP will normally provide an income to a spouse or civil partner if you die before them, according to MoneyHelper. Other death benefits depend on the policy terms, which the provider can send you.

Can a Section 32 pension be taken before 55?

Only if an earlier age came with it. MoneyHelper says your existing rights, including the minimum age you can take your pension, are normally carried over into a buyout policy, so the policy terms show whether yours has one. A GMP can still block early payment, as ReAssure explains above.

How do I find out whether my Section 32 holds a GMP?

The policy documents or an annual statement may show it, and the provider can confirm it. Finding your GMP sets out what to ask for.

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