Pension transfer values remained stable during August continuing their steady trend for 2018, according to latest figures.
Transfer values, as measured by the XPS Pensions Group Transfer Value Index, dropped slightly, from £233,000 at the end of July to £232,000 at the end of August this year.
For the duration of this year so far the index has remained relatively stable, fluctuating merely between £230,000 and £235,000.
The index tracks the transfer value that would be provided by an example defined benefit (DB) scheme to a member aged 64 who is entitled to a pension of £10,000 each year starting at age 65 and increasing each year in line with inflation.
The index reported that during the month of August, the difference between maximum and minimum readings was £4,100 or about 1.7 per cent.
Sankar Mahalingham, head of DB growth at XPS Pensions Group said: "Transfer values remained very stable during August 2018, continuing the trend we have seen since September 2017.
"Both gilt yields and inflation have remained stable during the month."
On 2 August this year, the Bank of England monetary policy committee raised the base rate of interest from 0.5 per cent to 0.75 per cent which is the highest level since 2009. Earlier today (13 September) the Bank announced rates would remain unchanged.
Andy James, head of retirement planning at Tilney, said if rates were to increase suddenly then value would fall but he added this was unlikely.
Mr James said: "Long term rates tend to move less than short term rates and to an extent short term expectations will be factored into longer term rates. They are therefore less volatile as can be seen from the relative lack of volatility in the index over recent times.
"If we see an unexpected rise in rates then the likelihood is that transfer values as a whole would fall but at present this seems unlikely and hopefully a continued level of overall stability will be seen."
But he added: "There are many components to a cash equivalent transfer value and each scheme will have its own rules around how they are calculated. This means that working out a transfer value is complex and one scheme's transfer value for the same benefit will probably differ from another."
rosie.quigley@ft.com
