Pension transfer values remain stable in June

Pension transfer values remain stable in June

Pension transfer values remained broadly stable in June, according to the latest transfer value index from XPS Pensions, formerly Xafinity Punter Southall.

The index, published today (16 July), showed a transfer value of £234,000 at the end of May and £233,000 at the end of June, meaning there was a small dip during the month.

The difference between maximum and minimum readings during June was £4,400 or about 1.9 per cent.

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In May the value had risen from £232,000 posted in the previous month, according to the specialist in pensions actuarial, consulting and administration.

Over the first quarter of 2018, transfer values initially dropped, before returning to levels seen at the beginning of the year.

During 2017, transfer values remained high, but in line with the figures of the previous year - at an average of £234,000 at the end of 2016.

Sankar Mahalingham, head of DB growth at XPS Pensions Group, said: “Transfer values have been stable over the first half of 2018, during which the index has fluctuated by only £8,300 or around 3.6 per cent.

 “Given the recent UK political upheaval and its potential impact on the approach to Brexit, coupled with the changing global political climate, for instance in relation to possible escalation of trade wars, it remains to be seen whether this low volatility in markets and transfer values will continue over the coming months.”

The XPS 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.

Jon Bean, chartered financial planner at Newton Aycliffe-based Eldon Financial Planning, said he was happy to see stability in transfer values but warned any transfer decision needed to be based on a client's circumstances, not just value.

He said: "There are often valid reasons for opting for a transfer out of a defined benefit scheme, and often compelling reasons to remain in.

"From our perspective any decision to transfer, or otherwise, must be based upon a full review of all financial objectives and circumstances."

He said stability in transfer values should be welcomed as it means clients do not feel so pressured to meet the CETV guarantee deadline.

But he said his firm had heard of DB transfers being ‘pushed’ on the basis that values can’t stay at these historic highs.

He said: "We’d always want to see a reasoned and rational approach to transfers, unswayed by time pressures, to ensure that the decision taken is absolutely the correct one for the individual, and their family, based upon their own circumstances.

"If that means obtaining another transfer value rather than rushing to hit a deadline then I’d much rather this occurred in calm waters than in volatile ones."