DB transfer values fall for fourth consecutive month

Defined benefit (DB) transfer values fell for the fourth consecutive month in December, falling from £241,700 at the end of November to £238,800, according to XPS Pensions.

Its latest Transfer Value Index attributed the fall to increases in gilt yields, also noting that a number of key market developments had made 2019 a “busy year” for the pensions transfer market.

Despite the continued fall in values, XPS’s Transfer Activity Index also recorded an increase in the number of transfers completed in December, to an annual equivalent of 0.91 per cent of eligible members (up from 0.81 per cent in November).

The index ended the year 9 per cent below its peak of £260,400 on 3 September 2019, though having begun the year at £235,200 the transfer values have “effectively finished 2019 where they started”.

XPS Pensions Group partner, Mark Barlow, said: “2019 has been a turbulent year for transfer values, although November and December were two of the most stable months of the year.

“Throughout 2019 Brexit dictated the direction of travel for the Transfer Value Index as confidence in the UK government fluctuated, impacting gilt yields."

Commenting on the key shifts seen over the last year, Barlow added: “The index hit its lowest value of 2019 (£232,100) on 17 January...It remained low for some time until, on 21 March, the EU agreed to delay Brexit, resulting in the biggest rise of the year for the index (2.9 per cent over two days)."

"The political uncertainty over the summer led to lots of volatility as gilt yields fell, with the index hitting its highest value ever on 3 September (£260,400).

“The day after, a bill to block a no-deal Brexit passed its first vote in the House of Commons, prompting a rise in gilt yields and the following two days saw the biggest fall of the year in the transfer value index (-4.6 per cent).

"This volatility shows no signs of abating with Britain due to leave the EU on 31 January.”

XPS' Transfer Value Index shows the estimated cash transfer value of a 64-year-old member with a pension of £10,000 a year with typical inflation increases. The value changes over time with market movements.

XPS Pensions Group’s Transfer Activity Index represents 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.

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