Defined benefit transfer values have fallen to their lowest month-end level since 2018, new data from XPS Group shows.
XPS Group’s Transfer Value Index remained relatively stable throughout most of 2024, but saw a significant decline in the final quarter, resulting in its lowest month-end value by December.
XPS said the sharp rise in gilt yields towards the end of the year, coupled with flat inflationary expectations, had resulted in a decrease in the Index of almost 5% during December. It noted that such levels of month-end gilt yields have not been seen for over 25 years.
The level of transfers also remained relatively low over the past year, with an annualised rate of 17 members in every 1,000 transferring their benefits to alternative arrangements, similar to the rates seen since mid-2023. XPS said pension transfers appear to be a much less popular option than a few years ago, likely reflecting the lower level of transfer values caused by the higher gilt environment.
Meanwhile, 85% of cases reviewed by the XPS Scam Protection Service in December raised at least one scam warning flag, a drop of 4% on the previous month. Levels have remained close to 90% throughout 2024, although there was a slight dip in the fourth quarter of the year.
Helen Cavanagh, senior consultant at XPS Group, said: “Significant increases in gilt yields in the last month of 2024 brought the Transfer Value Index down to the lowest month-end value since the Index began. After a relatively stable year, gilt yields have reached levels not seen since the early 2000s, causing the decline in transfer values over December.
“Despite this downturn, the overall level of transfer activity remained notably stable over the course of the year, showing minimal fluctuation month to month. Whilst overall transfer volumes are down, we believe many members still view this as a valuable option when planning for their retirement arrangements.”
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