DB Pension Transfers Top Out At Record High – For The Lucky Ones

Employers were offering record £260,400 pension transfer values at the start of September before the value of golden goodbyes dropped dramatically.

The peak was hit on September 3 and stayed open for 10 days before plunging to £247,700 on September 13, says market monitor XPS Pensions.

Transfer values ended the month at an average £254,300, slightly below the August figure of £255,600.

Volatile gilt yields triggered turbulence in the market, says the market report for September.

The firm has also noticed the average age of retires switching pension funds has risen from 55 years old to 57 during the past three years.

Turbulent month for gilts

The reason is suspected to be guidance to IFAs from City watchdog the Financial Conduct Authority which discourages advisers to recommend a transfer away from a direct benefit pension scheme to retirement savers aged 55 or below.

Mark Barlow, a partner at XPS Pensions Group said: “September was a very turbulent month for the financial markets, mainly due to ongoing political uncertainty around Brexit. This has resulted in significant volatility in the transfer value index, with a 5% swing being seen during the month. Despite the recent increases in transfer values being quoted, transfer activity remains close to the lowest levels that we have witnessed in recent years.

“The increase in the average age of direct benefit pension transferees reveals that transfers are most attractive to members approaching the point of retirement. It is important that trustees and sponsors consider this when setting transfer values, designing communications and helping members to find an appropriate financial adviser.”

Deficits bounce back from slump

Meanwhile, new data revealed the deficits of Britain’s major direct benefit pension schemes dropped £50 billion from £340 billion in August to £290 billion in September.

The fall follows a £100 billion increase in august to the biggest deficit since early last year.

Steven Dicker, chief actuary of consultancy PwC, which tracks pension fund values, said:  “There has been an improvement in the assessed deficit over the month due to a small rally in gilt yields combined with a slight fall in inflation expectations. However, gilt yields remain at historic lows and poorly hedged schemes will continue to feel the brunt of this volatility.”

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