On the go: Almost a third of pension schemes — 30 per cent — have taken action to improve outcomes for their members when transferring out of their defined benefit plan, according to research from XPS Pensions.
The survey, published on Wednesday, which considers the outcomes for 2,200 members who chose to transfer from a scheme administered by XPS Pensions, concluded that 23 per cent of schemes have introduced enhanced member communications to improve understanding, while 15 per cent of individuals will be able to transfer part of their DB pension.
Other improvements include access to a low-cost transfer option, which already exists or will be introduced for 19 per cent of members, while 13 per cent have support from a financial adviser at retirement.
Overall, XPS Pensions’ research showed that member outcomes have improved as a result of more individuals choosing to transfer to less expensive self-invested personal pensions.
However, concerns remain that too many savers are transferring to these schemes, despite this not being the best option. Ninety-eight per cent of members transferred to a Sipp between April 2019 and March 2020, despite the majority not necessarily needing the additional features that a higher charging Sipp provides.
The survey also found that the average transfer value was £290,000, an increase of around 5 per cent since last year.
According to XPS Pensions, the typical transferring member is healthy, financially secure and better at using online technology than the average DB pension scheme member.
The consultancy also found that the value of transfers has also increased following Covid-19, but there was a 20 per cent reduction in transfers processed in May 2020, compared with the same period last year, and a 30 per cent drop in requests for a cash equivalent transfer value.
Transfer activity is set to rebound, however, as lockdown measures continue to be loosened and members look to their pensions for financial help, according to Mark Barlow, partner at XPS Pensions.
“Some members will see their jobs come under pressure and the value of other assets such as their home fall relative to the value of their pension. The temptation to access pension savings may increase along with the risk of scams,” Mr Barlow said.
“It is very important that trustees and sponsors assess how vulnerable their members may now be and use this to tailor support. This can include scam protection, the channels they use to communicate with members, and education on costs and options.
“For some, a low-cost employer destination vehicle may allow people to access flexibility they may soon need without incurring substantial pension charges.”
This article originally appeared on ftadviser.com
