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Gilt yields and inflation push up pension transfer values

13 November 2018

Pension transfer values as measured by the XPS Pensions Group Transfer Value Index fluctuated during October 2018 exhibiting a difference between maximum and minimum readings of £8,600 (or around 3.6%).

Month to month the index rose 5% – the index was £230,000 at the end of September and £235,000 at the end of October.

Sankar Mahalingham, head of DB Growth, XPS Pensions Group saidthe increase in transfer values over October 2018 was due to both a drop in gilt yields and an increase in inflation over the month.

“This is the biggest monthly change for over a year,” he pointed out. “In fact, the fluctuation in October is almost as much as that for the year to September 2018.

“We mentioned last month that it was possible there would be a return to volatility as we approach the deadline for agreeing a deal for Britain leaving the European Union and continued speculation about the type of deal negotiated, including no deal, all of which may impact gilt yields and inflation expectations.”

The XPS Pensions Group Transfer Value Index tracks the transfer value that would be provided by an example DB scheme to a member aged 64 who is currently entitled to a pension of £10,000 each year starting at age 65 (increasing each year in line with inflation). Different schemes calculate transfer values in different ways. A given individual may therefore receive a transfer value from their scheme that is significantly different from that quoted by the XPS Pensions Group Transfer Value Index.

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