On the go: Defined benefit pension transfer values soared to an all-time high on August 21, according to the latest analysis from consultancy XPS Pensions.
The estimated cash transfer value of a 64-year-old member with an annual pension of £10,000 and typical inflation increases reached £258,200, up from £247,400 at the end of July 2019.
The increase was largely driven by a fall in gilt yields during August, partially offset by a small fall in inflation expectations.
The number of members requesting a transfer value also continued to rise, with some members choosing to pay for an updated calculation as transfer values hit their peak.
Mark Barlow, partner at XPS, commented: “The continuing fall in gilt yields has pushed transfer values to record highs, around 10 per cent higher than they were this time last year. Although there is a lot of uncertainty around the future of the financial markets, an increase in transfer values will mean we are likely to see a lot of members investigating their options.”
He advised trustees and sponsors to “ensure that members considering long-term irreversible decisions are being provided with sufficient education and support to enable them to make the right decisions for their circumstances and financial futures”.
Recent Financial Conduct Authority research shows that between October 1 2017 and September 30 2018, 69 per cent of people who sought advice were advised to transfer out of their DB scheme, despite the regulator’s insistence that in the majority of cases transfers were not suitable.
Mr Barlow also urged “schemes to consider how the substantial changes in market conditions have affected the funding strategy and whether, in light of this, the transfer value basis remains appropriate”.
