Retirement savers should have more choice than leaping off the all-or-nothing transfer cliff when moving funds away from a workplace pension, says a leading consultancy.
Instead, every pension scheme should have a partial transfer option.
Few direct benefit pension schemes offer this option although around 30% are considering the move, points out XPS Group in the latest Member Outcomes Survey.
The report highlights that 99% of the 1,800 retirement savers surveyed moved their funds to a self-invested personal pension (SIPP), but the average transfer was just £10,000 a year.
XPS Group senior consultant Helen Ross, said: “More pension scheme trustees are investigating offering their members a partial transfer. Current availability of this option is minimal. If this changes it could make a real difference to member outcomes.”
Although SIPPs offer wider investment opportunities and the option of accessing savings from the age of 55 under pension freedoms, many also come with higher charges and a range of benefits the retirement savers do not want or use.
Building on the survey for 2018, when 6,000 transfers were followed with an average transfer value of £235.000, the 2019 survey tracked another 1,800 transfers worth £500 million.
The average transfer value has risen was up 15% to £275,000.
“With so many members leaving schemes – approximately 1.5% of eligible members or 70,000 each year – there is still disappointingly little variety of destination for transfers, as the survey reveals 99% of members are moving to a SIPP,” said the report.
Give savers more options
“Given the low average size of pension transferred we remain concerned that many members may not need, or benefit from, the potential upside that higher cost SIPP offerings can provide.”
The survey recommends pension providers should offer more support to retirement savers to help them make the best decisions about their finances.
XPS Group is also calling for pension providers to offer more low-cost transfer options, partial transfers and access to independent financial advice.
“Retirement savers not looking to use the extra features of expensive products should be made aware of the low-cost options,” said the report.