Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Buy-out definition

What does Buy-out mean? In pensions practice, a buy-out is where the trustees of an occupational pension scheme secure members’ promised benefits by purchasing individual annuity policies from an authorised life insurer, in the name of each member or other beneficiary. The insurer then becomes responsible for paying the benefits, and the scheme’s (and employer’s) liabilities to those individuals are discharged. Buy-out is a descriptive term rather than one defined in legislation, but the discharge of trustee liabilities, the order of priority on winding up and member protection requirements are set by pensions legislation and regulatory guidance. Usage and effect are broadly consistent...

Section 32 buy-out policies: UK legal overview of structure, pre- and post-A-day regime, GMP obligations, benefit crystallisation and block transfer protections

Published by a LexisNexis Pensions expert

Practice notes

What is a section 32 buy-out policy?

In pensions, the term ‘section 32 buy-out policy’—also known as a section 32 policy or pension buy-out bond—describes a specific type of buy-out policy named after section 32 of the Finance Act 1981, which has since been repealed. These arrangements were especially common before 1988, that is, before personal pension schemes appeared. As with other buy-outs, a section 32 is a deferred annuity contract. It is purchased 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) from a pension scheme, so that the benefits are transferred from the scheme to be held under the policy.

One-member arrangements
Separate from the pension scheme that originally held the member’s entitlements
Set up to pay the transferred benefits to, or in respect of, the member at a future date
The benefits will always be deferred

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Wyn Derbyshire

gunnercooke LLP

Wyn is a partner at gunnercooke LLP and specialises in pensions, trust and employment law in all industry sectors, dealing with the transactional, advisory and documentation aspects.He also has wide experience of the pensions implications of heavyweight corporate transactions and flotations, the issues arising from the establishment and merger of pension schemes, and sex equalisation and other discrimination issues in respect of benefits provided by pension schemes. In addition, he provides advice to pension scheme trustees generally.Recent transactions include advising Amcor on pension matters relating to the acquisition of Alcan business and the acquisition of Northern Foods PLC by Boparan Holdings.He is a co-author (with Stephen Hardy and Stephen Maffey) of TUPE: Law and Practice, published by Spiramus Press (now in its 4th edition), and co-author (with Stephen Hardy and David Wicks) of Money & Work, published by Spiramus Press in August 2007. He has also...

Web page updated on 21/05/2026

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