Pension schemes will need to pay close attention to their cash outflows as defined benefit transfers are set to continue in 2018, Willis Towers Watson has warned.

According to the firm, schemes will need to monitor their portfolios closely “to avoid an imbalance that would impact their risk or growth profile”.

The pension freedoms ‘dash for cash’ shows no signs of slowing down, despite the 0.25 per cent increase in the Bank of England’s base interest rate in November and improving gilt yields.

Willis Towers Watson head of UK retirement, Peter Rowles, said: “Members are looking at the transfer value quote they are able to obtain from their scheme, along with the opportunity often to take a bigger tax free lump sum from a defined contribution pot, and a large number are choosing to transfer out of their DB scheme.”

Rowles argues that lower transfers could be offered to DB scheme members as interest rates rise and gilt yield improve, causing schemes liability figures to reduce, but doubts it will have a slowing effect on transfers this year.

He said: “The indications are that interest rates, although rising, will do so slowly and I think this is unlikely to have an immediate impact on transfers in 2018 – we are going to continue seeing significant numbers of employees exiting their DB pensions this year.

“Clearly this kind of decision shouldn’t be taken lightly. As we enter an era of higher inflation, an index linked DB pension can provide the kind of long-term security that isn’t necessarily available to those with a flexible DC retirement pot. People should also seek independent financial advice before making any big decisions on their financial future.”

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