On the go: The introduction of pension freedoms in 2015 has contributed an estimated £45bn of additional benefit payments made by FTSE 350 defined benefit schemes, research from Barnett Waddingham has revealed.
The consultancy found that just over £200bn was paid out of FTSE 350 DB pension schemes to members from 2015 to 2020. Barnett Waddingham noted that this figure is around £45bn higher than in previous years due to the introduction of the pension flexibilities as part of the freedom and choice reforms.
Notably, the research identified the UK’s four largest banks as having seen an especially high outflow of transfer payments, with Barclays leading the way with £4.2bn paid out in 2017.
The rate of transfer activity has slowed down in recent years, however. The value of payments spiked in 2017, with an estimated £14.4bn of transfer values paid out of FTSE350 DB schemes, whereas only an estimated £6.8bn was paid out in 2020.
Barnett Waddingham attributed this to several factors, including increasing regulation relating to the DB transfer advice process as well as a shrinking in the number of financial advisers willing or able to advise on DB transfers.
Covid-19 was also identified as a cause for companies and trustees to be more cautious in carrying out large, one-off transfer exercises.
Simon Taylor, Partner at Barnett Waddingham, said: “There has clearly been a huge amount of demand from members of DB schemes to access their pension more flexibly and draw income in a way that best suits their needs.
“Whilst welcome, the increased regulation in this area has made it more challenging for individuals to access suitable financial advice at a reasonable cost.
“We do expect to see a lower level of transfer activity over the coming years as a result of the increased regulation, but there will undoubtedly be an underlying level of demand from members to continue exploring this option.”
