PensionsDec 5 2017

Official pension bodies admit gaping hole in transfer data

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Official pension bodies admit gaping hole in transfer data

According to the PPF Purple Book 2017 released today (5 December), the number of deferred members in DB schemes - past members who have not yet reached retirement and who have the option of transferring out - has remained at 47 per cent since 2016.

The number of pensioners in receipt of a retirement income also stayed the same at 40 per cent, while there was a very small reduction of active members - those still contributing - from 13 per cent to 12 per cent.

The static figures are at odds with others which suggest a dramatic rise in the number of people who have sought to transfer out since pension freedoms rules were introduced in April 2015.

These rule changes gave many more people the option to take their nest eggs as a lump sum, but only if they were in a defined contribution scheme.

As people in DB schemes also sought to benefit from the changes, DB pension transfers have been soaring, with savers seeking to take advantage of sky-high transfer values.

Such a movement would be translated in a reduction of the number of deferred members in the PPF data, which are the ones who can transfer out their pension pots.

The PPF itself recognised in the report that “recent studies suggest that both the number of requests for transfer value quotations, and subsequent transfers, have been increasing, particularly in the year 2016/17”.

But it admitted that: “While this has not had a discernible effect on the proportions of active or deferred membership shown in the Purple Book 2017 dataset, we’d note that due to a lag in the effective date of the membership count in the data we receive, our membership data is unlikely to capture everything that’s happened since 2015.

“Any subsequent trends in member transfers will be captured in future Purple Books.”

The majority of the data of this report is based on information that eligible DB schemes are obliged to provide to The Pensions Regulator (TPR), and cover the 12 months from 1 April 2016 to 31 March 2017.

Nevertheless, according to a PPF spokesperson, the Purple Book is not focused on DB transfers.

He said: "The Purple Book tracks the risks faced by DB pension schemes in the UK. It helps us understand the universe of schemes we protect and feeds into our modelling to help us understand the claims we might face.

"This focus means that it is not intended to track all of the current themes that touch on the sector.”

The regulator itself has, however, admitted a lack in up-to-date figures on this matter.

In May, TPR revealed that 67,700 people transferred out of DB pension schemes in 2016.

However, the regulator estimated, at the time, that the number could be as high as 80,000 as not every scheme reported how many transfers they carried out.

The lack of data raises concerns that official bodies are not keeping on top of the number of people giving up valuable benefits such as a lifetime of guaranteed retirement income.

According to Nathan Long, senior pension analyst at Hargreaves Lansdown, “transfers from DB pensions to more flexible DC remain suitable only for the minority”.

He said: “It is incredibly important that data is collected in the number of people transferring away, but currently that data seems to be lacking.”

TPR and the Department for Work and Pensions (DWP) did not reply to requests for comment on the lack of up-to-date data by press time.

Overall, PPF’s Purple Book shows that the number of DB schemes closed to future accruals has risen to 39 per cent in 2017, up from 35 per cent in 2016.

This is a more notable rise when compared to the steady trend seen over the preceding years, the pensions lifeboat said.

Scheme funding is improving, reaching 90.5 per cent in 2017, rising from 85.8 per cent in 2016. The aggregate deficit fell to £161.8bn from £221.7bn a year earlier.

maria.espadinha@ft.com