Defined Benefit  

Pension transfer values fluctuate

Pension transfer values fluctuate

Transfer values have returned to September fluctuation levels with the difference between the maximum and minimum readings in December being £14,000, according to XPS Pensions Group.

The firm's monthly transfer value index showed December's fluctuation represented a 5.9 per cent swing in values, similar to levels last seen in September.

XPS stated the movement was due to gilt yields dropping by close to 0.5 per cent. The firm predicted further volatility in the first months of the year due to uncertainty around Brexit.

Overall, values had remained flat over the past two years, at £235,000 in December 2018, compared with £236,000 at the end of 2017, and £234,000 at the end of 2016.

The difference between maximum and minimum readings of the index in 2018 was £17,000 (or 7 per cent).

The XPS Pensions 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.

Sankar Mahalingham, head of DB growth at XPS Pensions Group said: "Transfer values jumped sharply in early December before gradually falling again towards the end of the month.

"These movements were primarily driven by changes in gilt yields, which dropped by almost 0.5 per cent, before recovering towards the end of the month. Inflation was also volatile, but less so, and ended slightly down over the month."

He added: "Despite being relatively stable over the course of the year, transfer values suffered a volatile December. This volatility may continue through the first quarter of 2019 as economic uncertainty around Brexit persists."