Golden goodbyes from companies offering final salary pensions to tempt workers to move their retirement cash to another pension are still running high.
The average payment to a saver leaving a workplace pension was £238,000 in October.
Although the sweetener was £5,000 less than the peak of £243,000 in September, the payment was still one of the highest since records started, said Paul Darlow of financial research firm Xafinity.
The lower figure was impacted by rises in gilt yields because of the falling pound.
Xafinity monitors final salary pension transfer values each month.
What is a golden goodbye?
The fund value is based on the amount a 64-year-old employee in a workplace pension should have saved to generate an inflation-linked income of £10,000 year from the age of 65.
“October saw very significant increases in nominal gilt yields which all other things being equal would have reduced transfer values,” said Darlow.
“However, most members’ benefits increase in payment in line with inflation. Inflation expectations increased over October, meaning that transfer values for members with inflation-linked benefits stayed at very high levels.”
The transfer value is the amount an employee can expect to transfer to a personal pension, such as a SiPP or Qualifying Recognised Overseas Pension Scheme (QROPS) if they are planning to move abroad.
Britain’s biggest private employers have faced a challenge funding pensions since the downturn.
Pensions billions in the red
Although the gap between liabilities and assets closed by £60 billion in October, according to accountancy firm PwC’s SkyVal Index, employers are still in the red by £630 billion.
The index tracks the value of more than 6,000 workplace final salary pension schemes and is considered a barometer of how the schemes are performing.
Raj Mody, PwC’s global head of pensions, said: “The funding deficit has improved by £60 billion this month due to a combination of asset and liability value movements during another volatile month.
“Slight improvements in gilt yields have contributed to the apparent deficit reduction, but liability measurement by gilt yields does not necessarily represent reality, given pension liabilities are mainly affected by longevity and inflation.”
Sainsbury has announced the supermarket’s final salary pension is now £1 billion in the red, while the BT pension is £9.5 billion underfunded – a rise of £3.3 billion since June.
