Defined Benefit  

DB transfer values climb in volatile markets 

DB transfer values climb in volatile markets 

Average transfer values on defined benefit pension schemes increased to £241,000 during May, according to the latest figures from Xafinit's Transfer Value Index.

Transfer values increased by 1.7 per cent from £237,000, with some significant fluctuations over the month.

The variation over May 2017 was over 3.5 per cent (or £9,000), similar to that experienced in April, following a relative period of calm for transfer values over the first quarter of 2017.

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Sankar Mahalingham, director, Xafinity said: “In May 2017 we have seen a continuation in the volatility of transfer values experienced in April; this month it has been caused mainly by variation in gilt yields.  

"Depending on the outcome of the general election, and with negotiations for Britain to exit the EU about to start in earnest, we expect the volatility will continue for some time yet.  Members continue to investigate this option while transfer values remain at high levels.”

Darren Cooke, director, of North Derbyshire-based Red Circle Financial Planning, said his experience echoes Xafinity’s findings.

“Transfer values are generally going up. I have one client who can log on to her DB pension scheme to see her transfer value and it went up £1500 in just a week. My client said to me: ‘Should I be logging on every day?’”

But Neil Adams, head of pensions at Drewberry, warns that a transfer decision should never be taken lightly: “We’re being contacted on a daily basis by clients considering a transfer out of their final salary scheme, many of which have been watching transfer values rise considerable over the last couple of years. Many of these clients want to know if transfer values have peaked and whether this is the right time to transfer.

“It is exceptionally difficult to try and second guess whether transfer values will rise or fall. Transfer values are already very high and whether a transfer is appropriate should be based on whether the offer made by a client’s individual scheme represents fair value relative to other schemes and the individual needs and objectives of the client. This decision should never be taken lightly.”

The Xafinity 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).