DB transfer values fall to near pre-lockdown levels

Defined benefit (DB) transfer values have fallen to levels "similar to pre-lockdown" over the past month, reaching £253,200 at the end of August, according to XPS Pensions Group.

The XPS Transfer Value Index showed that transfer values had fallen “consistently” throughout the month from the record-high levels recorded in July of £260,700, attributing this fall to an increase in gilt yields.

Meanwhile, the Transfer Activity Index also showed a decline in activity of around a third in August, falling to an annual equivalent of 0.67 per cent of eligible members, compared to 0.94 per cent in July.

Commenting on the figures, XPS Pensions Group partner, Mark Barlow, said that it "is not surprising" that transfer values have fallen back following the record highs recorded in June and July.

He highlighted that this has also been accompanied by a fall in transfer activity, which he noted could be result of the "usual summer lull", or an indication of members struggling to find firms to advise on their transfer value.

XPS also launched a Red Flag Index as part of its Transfer Watch tracker, after its previous research revealed that over half (51 per cent) of pension transfers covered by the XPS scam protection service since lockdown were flagged as being at risk of scam.

Commenting, XPS Pensions Group senior consultant, Nicola Young, stated: “The overall incidence of red flags has been increasing over time, with around 35 per cent of cases since July 2019 identifying at least one warning sign.

“However, over the months since the Covid-19 pandemic we have seen this rise to around 50 per cent of cases.

“The worrying spike in recent months is driven by a significant increase in members that have little to no understanding of fees in the arrangement they want to use to access their pension savings.

“This may be as a result of people urgently wanting to get at their savings due to current economic conditions.”

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