DB transfer values show sharp drop over September

Written by Talya Misiri

Defined benefit transfer values fell sharply over September from £240,000 in the first week to £230,000 by the end of the month, Xafinity has revealed.

According to the Xafinity Transfer Value Index, transfer values fell by four per cent over the month to £230,000.

The difference between maximum and minimum readings of the Index over September 2017 was £12,000, around five per cent.

In August, transfer values rose by three per cent from £230,000 at the beginning of the month to £237,000 at the end of the month. The difference between the maximum and minimum readings of the Index over the month was £9,000, around 3.6 per cent.

Sankar Mahalingham, Head of DB Growth, Xafinity comments: “We have seen a sharp fall in transfer values over September 2017, reversing the increases experienced during August. The driver for the fall was an increase in gilt yields over the month, with longer term expectations for inflation remaining largely unchanged.

“Historic CPI inflation was 2.9% in the year to the end of August, up from 2.6% a month earlier; this statistic was released on 12 September. This raised speculation in the markets that the Bank of England Monetary Policy Committee may start to raise the Official Bank Rate sooner than previously thought. This possibility was reinforced in comments made by Bank of England Governor Mark Carney in a lecture given to the International Monetary Fund in Washington a week later. When expectations for increases in the Official Bank Rate accelerate, it is normal to see gilt yields increase, all else equal, meaning the rise in yields over the month was not surprising.”

The Xafinity Transfer Value Index tracks the transfer value that would be provided by an example DB scheme to a member aged 64 who is currently entitled to a pension of £10,000 each year starting at age 65 (increasing each year in line with inflation). Different schemes calculate transfer values in different ways. A given individual may therefore receive a transfer value from their scheme that is significantly different from that quoted by the Xafinity Transfer Value Index.

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