Defined Benefit  

Defined benefit transfer values stablise

Defined benefit transfer values stablise

Defined benefit (DB) transfer values increased slightly only by 0.4 per cent in October, according to Xafinity.

Transfers increased from £230,000 at the beginning of October to £231,000 at the end of the month, according to the specialist in pensions actuarial, consulting and administration.

The difference between maximum and minimum readings of the index was £5,000 (or around 2.3 per cent).

Article continues after advert

According to Sankar Mahalingham, head of defined benefit growth at Xafinity, “transfer values stayed fairly stable during October 2017, compared to the volatility” in previous months of 2017.

He said: “At the beginning of November, the Bank of England raised the official bank rate for the first time since July 2007, but this was anticipated by markets and was already reflected in the fall in the index over September 2017 (and there has been little change to the Index in early November).

The rate rise, from 0.25 per cent to 0.5 per cent, is expected to drive down defined benefit transfer values.

Sir Steve Webb, director of policy at Royal London, said at the time of the base rate increase that anyone considering a transfer may wish to take impartial advice on the pros and cons of a transfer "as a matter of urgency, as transfer values are unlikely to remain at today’s very high levels”.

Xafinity's Mr Mahalingham said: “The markets are anticipating another rise towards the end of 2018; any delay in a rise would mean an increase to transfer values.”

The Xafinity transfer value index tracks the transfer value that would be provided by an example of a defined benefit 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, however.

A given individual may therefore receive a transfer value from their scheme that is significantly different from that quoted by the Xafinity transfer value index.

maria.espadinha@ft.com