DB transfer values in record fall - XPS

Defined benefit transfer values dropped from £254,300 at the end of September to £244,200 at the end of October, according to the latest XPS Pensions Group’s Transfer Value Index, representing the largest drop in the index since it was created.

The decrease was attributed to increases in gilt yields and a fall in expected inflation over the month.

The number of DB transfers has risen to an annual equivalent of 0.99 per cent of eligible members, despite the significant decrease in DB transfer values.

Whilst the highest rate since March, this was broadly in line with long-term rates.

Commenting on the latest findings, Partner at XPS Pensions Group Mark Barlow, said: “October was another turbulent month for the financial markets. The rise in gilt yields has resulted in the largest fall in our Transfer Value Index since its inception, with transfer values 4 per cent down on the previous month end.

"However, transfer activity has increased substantially which is possibly a reaction to the record high transfer values seen over the summer months.

“The Pension Schemes Bill 2019-20 was not expected to have a significant effect on transfer activity but it was intended to protect members from scam activity.

"Protecting members from such activity has been a focus for us in recent years and we hope that the protections envisaged by the bill are not lost as a result of the forthcoming general election.”

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 represent 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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