Defined benefit (DB) transfer values dropped by 3 per cent in March as the number of transfers dropped to new lows, according to XPS Pensions Group.

The pensions consultancy’s Transfer Value Index dropped from £249,700 at the end of February, to £242,600 at the end of March as fluctuations in gilt yields led dramatic movements throughout the period.

During the week ended 19 March, transfer values fell by 11 per cent to £222,800, a level not seen since July 2016, which XPS attributed to the Covid-19 pandemic’s effect on gilt yields.

The Transfer Activity Index recorded a fall in the number of transfers completed, from an annual equivalent of 0.89 per cent of eligible members in February to 0.76 per cent in March, the lowest level recorded by the index since its inception in 2018.

In February, XPS’ indexes had indicated a £3,900 increase in transfer values and a drop in the number of transfers completed from 1.03 per cent of eligible members in January.

XPS partner, Mark Barlow, said: “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 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.”

Barlow also welcomed the introduction of transfer guidance from The Pensions Regulator (TPR) on 27 March, stating that it provided “comfort to those trustees looking to pause and take stock”.

On 27 March, TPR’s coronavirus guidance confirmed that the regulator would not use its powers for a period of 3 months where trustees suspend transfer values and, as a result, breach transfer value disclosure requirements.

“We have found that around 75 per cent of our clients are still able to continue quoting and paying DB pension 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 Barlow.

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