On the go: The number of defined benefit transfer requests has dropped in the past quarter, but the average value still rocketed to above £500,000.
According to consultancy LCP, the average DB transfer in the three months to June was worth £556,000, up 30 per cent compared with the first quarter, exceeding £500,000 for the first time in three years.
The company said the figures indicated the DB transfer market was moving to a smaller number of higher-value transfers. Among the 80 schemes administered by LCP, about one in five individuals who had received a transfer value quotation completed a transfer out in the second quarter, the lowest take-up rate since 2016.
There was also a sharp reduction in the number of transfer quotations in March, April and May, with the rate of requests falling to less than half of its pre-lockdown level. In June requests picked up, but after peaking in mid-June they settled back and are currently running at about 75 per cent of pre-lockdown levels.
LCP said this could be a result of individuals’ unwillingness to make major financial decisions in the midst of the Covid-19 lockdown period, as well as guidance from the Pensions Regulator that allowed schemes to take longer when processing pension transfers.
Bart Huby, partner at LCP, said: “It’s no surprise that this quarter has seen such a dip in pension scheme members asking for quotations or taking up quotations they had already received, given that it coincided with the height of the pandemic.
“But it seems as though those with the largest pensions have been the least likely to be put off from completing a transfer.”
However, Mr Huby has warned a crackdown by the regulator in this area could dampen growth.
He said: “While the Covid-19 impact is ongoing, the transfer market is about to enter into very new territory, as the Financial Conduct Authority's ban on contingent charging comes into effect in a few weeks.
“This could have a big impact on the number of quotations requested. It may also make it harder for members to get the right advice, as we expect it will lead to many advisers leaving the market.”
This article originally appeared on ftadviser.com
