Individuals transferring out of their defined benefit pension scheme are facing record fees, according to XPS Pensions Group.
The firm’s fourth annual Member Outcomes survey found that members transferring in the year to 31 March 2021 faced average total fees of 1.9% per year, a 10% increase on the previous year and the highest level since XPS’ survey began in 2018.
XPS said the sharp increase in fees came as average transfer values rose significantly. While the number of members transferring over the year to 31 March fell 23% on the previous year, the average transfer value paid jumped by 29% to £375,000.
The rise was driven by members with the largest values choosing to transfer their pension, XPS said.
The survey showed that 99% of members transferred to a self-invested personal pension, which may have also driven the increase in fees, with fees ranging from 0.7% a year to over 3%.
Mark Barlow, head of member options, XPS Pensions Group, said: “The slowdown in transfer activity over the last 12 months is unsurprising since most of the year was spent in lockdown. Interestingly, it’s been those with the largest values who have continued to transfer. This, together with the reduction in choice for members transferring, may explain why average charges have increased by 10% since last year.
“We’ve been encouraged to see trustees and employers step up support, with 50% of members of schemes we work with now having access to enhanced support, up from 31% last year.
“However, the pent-up demand from fewer transfers and retirements means there’s likely to be an increase in members considering their options soon. As a result, it’s as important as ever that trustees and employers take steps to improve the support they provide and ensure the best outcome possible for their members.”
