On the go: Market volatility resulting from the Covid-19 pandemic has led to wild swings in the value of defined benefit pensions, causing headaches for members considering a transfer.
Average transfer values fell 3 per cent in March, according to consultancy XPS Pensions. But the monthly fall, delivering £242,600 in exchange for a typical £10,000 annual pension, masks more dramatic changes.
XPS's index bottomed out at £222,800 during the week to March 19, a fall of 11 per cent and a return to values not seen since July 2016.
Mark Barlow, partner at XPS, commented: “The unprecedented COVID-19 crisis has sent shockwaves through the financial markets, causing the greatest fluctuations we have ever seen in the Transfer Value Index.
With members apparently unsure about how to proceed, the level of transfer activity has also dropped to 0.76 per cent of eligible members a year from 0.89 per cent.
The lowest level of transfer activity observed by the consultancy may be explained by the Pensions Regulator's intervention in the running of DB schemes amid a sharp increase in scam activity. The regulator assured trustees they will not face action if they choose to suspend transfer quotations for three months.
However, XPS's client data suggests hesitation is instead coming from members, with around three-quarters of its administration clients still able to quote and pay out DB transfers
"In these cases, member support services such as scam protection and high-quality financial advice will be crucial in protecting member outcomes in the current environment,” said Mr Barlow.
“With such volatile markets, it is perhaps unsurprising that transfer activity has also fallen to the lowest level since the inception of the index, as members shy away from big financial decisions in the current climate," he added.
