‘Steady decline’ in transfer activity since mid-2018 – XPS

There has been a ‘steady decline’ in transfer activity since mid-2018, according to XPS Pensions Group.

Launching its new XPS Transfer Watch, which replaces its monthly Transfer Value Index with transfer values and activity, the group said that a significant number of pension scheme members continue to leave schemes to access the pension freedoms. The new index looks at how many members are leaving schemes that XPS looks after.

The new index found that when it comes to transfer values, low yields mean transfer values remain historically high. Over April 2019, pension transfer values as measured by the XPS Pensions Group Transfer Value Index fluctuated mildly, with a small fall over the month. The index was £243,900 at the end of March, and £242,300 at the end of April.

Movements in gilt yields and inflation expectations were more settled compared to March. By the end of the month gilt yields had increased (lower transfer values) slightly as had inflation expectations (higher transfer values) with the change in gilt yields being a little bit more than inflation resulting in the small reduction in values overall.

In terms of activity, over the period of the new index, typically 1-1.5 per cent of eligible members (on an annualized basis) left the schemes administered by XPS each month. XPS said this may seem small but is a significant number of people. If replicated across all UK DB schemes this means between 50,000 and 70,000 members are leaving schemes each year.

However, the index showed that there has been a steady decline in activity since mid-2018. XPS expects that this is a consequence of a slow down after a rush of transfers over 2018 due to greater member awareness and actions taken by regulators, employers and trustees to better support and protect members. However, it is expected that activity levels will remain significant going forward given the attraction of relatively large transfer values and pension freedoms. There is a significant dip in activity in December, which may have been linked to schemes pausing transfer values whilst they got to grips with the complications arising from GMP equalisation.

XPS pensions group’s Mark Barlow commented: “We are excited to launch our Transfer Watch today giving clear insights into activity. This is a key part of our focus on helping members achieve good retirement outcomes.”

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