DB transfer values recover in January

Defined benefit (DB) transfer values increased by almost three per cent in January after declining in the final quarter of 2019, according to data from XPS Pensions.

The pensions consultancy’s Transfer Value Index found that transfer values had climbed to £245,800 at the end of January, up from £238,800 at the end of December.

This recovery was driven by a 0.3 per cent fall in gilt yields over the month, which was partially offset by a smaller fall in inflation expectations.

The 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.

Meanwhile, XPS’ Transfer Activity Index recorded also showed an increase in the number of transfers completed in January, which rose to an annual equivalent of 1.03 per cent of eligible members from 0.91 per cent in December.

XPS Pensions Group head of member options, Helen Ross, said: “The marked increase in transfer activity is likely due to the elimination of some of the political uncertainty plaguing the markets over the last year, which may have been putting members off making big financial decisions.

“We are regularly asked whether there is any evidence of a surge in DB transfers as members try to beat a possible ban on contingent charging this year, but this is not strongly suggested by the numbers of members transferring from XPS administered schemes, but this may well materialise.”

XPS highlighted that the Financial Conduct Authority (FCA) has continued to focus on IFA advice for DB transfers, including encouraging firms to review their advisory processes and practices in a letter to firms’ CEOs.

The FCA’s letter stated they expect IFA’s to “start from the assumption that a pension transfer is not likely to be suitable for your client”, which Ross said “mirrors The Pensions Regulator’s sentiment for DB trustees”.

“I anticipate that we’ll see more of this positioning from the FCA going forward,” she added.

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