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Transfer values drop 4% in October but activity increases

10 November 2019

Defined benefit transfer values dropped substantially during October, according to the latest XPS Pensions Group’s Transfer Value Index.

The Index fell from £254,300 at the end of September to £244,200 at the end of October. XPS said the movements were driven by increases in gilt yields and a fall in expected inflation over the month.

The latest figures reverse the significant rises which had been seen over the summer, with transfers values hitting a high on 29 August of £258,600.

However, the number of members transferring increased over the month to end of October. The XPS Pensions Group’s Transfer Activity Index recorded an increase in the number of transfers completed in October, to an annual equivalent of 0.99% of eligible members, up from 0.80% in September. This is the highest rate seen since March, but still broadly in line with long-term rates.

XPS also noted the announcement of a Pension Schemes Bill 2019-20 included in the Queen’s Speech on 14 October, which included provisions to limit the range of circumstances under which a statutory right to a transfer value exists. This would introduce safeguards to allow trustees to refuse a transfer where there is a risk of a transfer being to unregulated funds.

Mark Barlow, Partner, XPS Pensions Group commented: “October was another turbulent month for the financial markets. The rise in gilt yields has resulted in the largest fall in our Transfer Value Index since its inception, with transfer values 4% down on the previous month end. However, transfer activity has increased substantially which is possibly a reaction to the record high transfer values seen over the summer months.

“The Pension Schemes Bill 2019-20 was not expected to have a significant effect on transfer activity but it was intended to protect members from scam activity. Protecting members from such activity has been a focus for us in recent years and we hope that the protections envisaged by the Bill are not lost as a result of the forthcoming general election.”

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