On the go: Some 70,000 members could be leaving defined benefit schemes each year, according to research by XPS Pensions.
Its new transfer activity index revealed that up to 1.5 per cent of members (of those who are able) opt to leave their pension scheme each year. This represents a substantial proportion of scheme liabilities.
If replicated across all pension schemes, 70,000 members could be leaving DB pensions each year, according to XPS’s analysis combined with the Pension Protection Fund’s Purple Book 2018 membership statistics.
Last year XPS followed 6,000 transfers, and in 2019 a further 1,800 transfers were tracked. Ninety-nine per cent of members moved to a self-invested personal pension.
“Many members may not need, or benefit from, the potential upside that higher-cost Sipp offerings can provide,” XPS pointed out in its research report, especially as the average size of pensions transferred is less than £10,000 a year.
Wayne Segers, principal at XPS, said: “A one-size-fits-all destination is unlikely to drive the best outcomes for all members. Some members may be paying for features they don’t need or use.
“Charges can have a devastating effect on members’ retirement incomes. Lower-cost, simpler Sipps and master trusts can help, and members deserve better support to easily access these.”
Support from employers
Employers are increasingly giving more support to their workers who are considering transfers.
The XPS survey showed that 40 per cent of members have implemented or are considering implementing a communications strategy, and 30 per cent are actively investigating partial transfer options.
It also found that 25 per cent are looking at introducing a low-cost receiving vehicle for members, and 10 per cent now have an independent financial adviser in place at retirement, with a further 25 per cent considering doing so.
