DB Transfer Numbers Lowest in 4 Years
Published / Last Updated on 27/01/2022
Defined benefit (DB) pension transfer out activity has fallen to its lowest level since 2028.
According to the XPS Transfer Activity Index, defined benefit transfers fell to 50 transfers per 10,000 pension schemes in December 2021.
Comment
Defined benefit transfer volumes have fallen due to a number of reasons:
- The Financial Conduct Authority and Government, in our opinion have made it so difficult and costly for you to get advice in this area. They do not want you to control your own money given the risks v guarantees lost.
- Less and less financial advisers are operating in this sector.
- Recent interest rate increases have pushed gilt and government bond capital values down and gilt yields up. In simple terms, the cost to buy a guaranteed pension with an annuity has fallen meaning transfer values have fallen.
- Lower transfer values means it is harder to justify giving up any defined benefit scheme and transferring to your own private pension or drawdown.
We expect the volume of DB transfers to continue to fall as interest rates increase, increasing gilt yields meaning lower transfer values and the inflation protection built into many DB schemes becomes ever more important.