Defined benefit pension transfer values rose sharply during July to end the month at £260,000, just short of the record high of £261,500 seen in July 2020, according to the latest data from XPS Pensions Group.

Its Transfer Value Index showed the estimated cash transfer value of a 64 year old member with a pension of £10,000 a year with typical inflation increases.

The leap in value was driven largely by a reduction in gilt yields and marks the end of a period of relative stability for transfer values, it said. 

DB pension transfer activity dipped slightly over the month, with the index showing that an annualised rate of 64 members out of every 10,000 transferred their pension.

The Scams Red Flag Index in July remained at a similarly high level to last month, with 54% of transfers showing at least one warning sign of a potential scam or poor member outcomes.

Mark Barlow, partner, XPS Pensions Group said: "With transfer values back to record highs, it's as important as ever that members are provided with as much support as possible when considering a transfer. Encouraging people to seek Pension Wise guidance is a sensible step, but for those deciding to leave their DB pension scheme it is imperative they also have access to high quality unbiased financial advice."

Helen Cavanagh, client lead, member engagement hub, XPS Pensions Group added: "Although the red flag index has stabilised this month, it remains at a concerning level. For cases where we identified a warning sign, almost 60% raised concerns relating to fees, including a lack of understanding of the fees that they will be paying in the receiving scheme. This could indicate members are transferring to arrangements that could give poorer retirement outcomes."

 

 

 

2020

2021

 

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Transfer Value Index (£000s)

253

256

257

256

259

254

242

246

247

251

248

260

Transfer Activity Index (%)

0.67

0.52

0.62

0.63

0.69

0.62

0.66

0.68

0.55

0.63

0.75

0.64

Red Flag Index (%)

51

62

60

64

76

60

58

52

59

61

55

54

 

XPS Pension Group's Transfer Watch monitors how market developments have affected transfer values for a typical pension scheme member. In addition, it monitors how many members are choosing to take a transfer from their DB pension scheme and, through its Red Flag Index, the incidence of scam red flags identified at the point of transfer.

On 9 July, the Department of Work and Pensions (DWP) launched a consultation on a "stronger nudge to pensions guidance". This proposes that pension schemes should be obliged to refer members to Pension Wise guidance before they access their benefits, as well as offering to arrange the appointment on their behal

XPS Pensions Group's Transfer Activity Index, (the bars on the chart) represent the annualised proportion of members that transfer out of pension schemes administered by XPS. If replicated across all private sector, funded, UK, DB schemes this indicates that approximately 50,000 DB members leave their schemes each year.

XPS Pensions Group's Red Flag Index tracks the percentage of monthly transfers reviewed by the businesses' scam protection service that are identified as having warning ‘red flags' which indicate that the member is at risk of being scammed. The red flags are based on the Pension Scams Industry Group's Code of Good Practice. The service is provided to the Trustees of approximately 250 occupational pension schemes.