The average transfer value increased by 5 per cent year-on-year to £290,000, as of March 2020, according to XPS Pensions Group.

Its Member Outcomes Under Freedom and Choice survey found that there had been around 2,200 transfers in 2019/20, worth a total of £637m.

Nearly all (98 per cent) transfers were to self-invested personal pensions (Sipps), with 91 per cent into platform Sipps and 7 per cent into full Sipps.

XPS noted that potential member outcomes for those choosing to transfer had improved for the first time since it started its survey, with many of the schemes it works with implementing initiatives to improve outcomes.

The accompanying report called for members to be given access to unbiased financial advice, ideally paid for by the scheme or employer.

The report stated that “many pension scheme members will face significant financial uncertainty” and may investigate their pension options as we emerge from lockdown, adding that “without action, there is a significant risk of poor member outcomes or, at worst, a rise in pension scams”.

Survey results from XPS showed that just 25 per cent of members were advised to transfer when high quality advice was sought, compared to a normal level of 69 per cent.

It added that members were less likely to be advised to enter “expensive full Sipps” after receiving higher quality advice, while more were encouraged to join existing employer schemes and other similar arrangements.

The provider noted that the value of pension scheme transfers had increased following Covid-19, with transfer activity having also started to pick up since April.

XPS outlined four recommendations for trustees and sponsors, with the remaining three including ensuring that education and support is provided to members alongside transfer values.

The pensions specialist added that schemes which had adopted a tailored engagement strategy were found to have more satisfied members who were better placed to make important retirement decisions.

XPS partner, Mark Barlow, added: “The coming months will be particularly challenging for pension scheme members. A transfer could look very attractive in the current economic environment, but there will be many risks associated with this option.

“Some members will see their jobs come under pressure and the value of other assets such as their home fall relative to the value of their pension. The temptation to access pension savings may increase along with the risk of scams. It is very important that trustees and sponsors assess how vulnerable their members may now be and use this to tailor support.”

It recommended that low cost transfer options be highlighted for appropriate members, adding that master trusts could provide members with access to full retirement flexibility at a low-cost.

XPS also suggested that members be offered partial transfers for their defined benefit pension pots, giving them access to freedoms and providing a way of tailoring transfers to suit an individual’s needs.

XPS head of member options, Helen Ross, commented: “The support and protection pension schemes offer will become critical. Understanding their membership in more detail, will enable schemes to tailor their support, particularly around communications and scam protection to best suit their specific member profiles.”

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