Defined Benefit pension transfer volumes dropped to a five-year low at the end of 2023, research from XPS Pensions Group has found.
The pension consultancy’s Transfer Activity Index saw a steady downward trend throughout the year. At the end of December, there was an annualised rate of 18 members in every 1,000 transferring their benefits to alternative arrangements.
The multi-year low comes despite an end-of-year bounce in transfer values from October’s record month end low.
According to XPS, the quoted value of a typical pension transfer increased by over 5% in December and by 6.5% over the last quarter of 2023 to £164,000, driven in large by a fall in gilt yields during the last few months of the year.
The consultancy also found that there was a continued increase in the rate of smaller pension pots being transferred, with 40% of transfer values being under £100,000 and one in six falling under the £30,000 mark.
Separately, XPS said 90% of cases reviewed by its Scam Protection Service in December raised at least one scam warning flag, the same amount as the previous month. The Scam Flag Index has remained high throughout 2023, although a slight dip in the second half of the year may have been down to more members transferring to purchase an annuity, the firm said.
Mark Barlow, head of member options at XPS Pensions Group, said: “Despite transfer volumes hitting record lows our research highlights that transferring as part of wider retirement planning remains a popular option for those over age 55.
“Given that, it’s important that schemes provide support to members to help them make appropriate decisions for their circumstances. We are particularly concerned that a rise in smaller transfer values may put more of the most vulnerable members at risk of being scammed, as they are not required to take financial advice. Schemes should consider how they can best support these members as they begin to access their pension pots.”
