Defined Benefit 

Pension transfer values respond to Brexit turmoil

Pension transfer values respond to Brexit turmoil

Pension transfer values experienced the largest fluctuation in four years in March as the Brexit debate in Parliament unfolded.

The latest transfer value index from XPS Pensions Group showed transfer values increased substantially during March, peaking at almost £251,000 before dropping back down to £244,900.

Nevertheless this marked an increase of £9,700 on the previous month end, while the difference between maximum and minimum readings in the month was £15,600 (about 6.2 per cent).

By comparison, over the whole of the first quarter, the index increased by £9,700 with the difference between maximum and minimum readings being £18,700 (about 7.5 per cent).

XPS stated the readings represented the highest intra-month peak, the highest month end, and the largest monthly fluctuation recorded since the inception of the index in April 2015.

Sankar Mahalingham, head of DB growth at the firm, said values had been impacted by the government's increasingly heated debates about Brexit, which eventually led to the postponement of the Brexit date from March 29 to, as it stands, April 12.

He said: "The movements in the transfer value index during March were largely driven by gilt yields, which fell by as much as 0.35 per cent, and ended the month around 0.3 per cent down.

"Inflation also increased by as much as 0.15 per cent but ended the month unchanged from the previous month end.

"Gilt yields were observed to drop markedly during the period from 19 to 22 March, around the same time as debate and votes in the House of Commons led to a change in the proposed Brexit date.  

"It is likely that further Brexit-related developments will continue to drive market movements for the foreseeable future."

XPS's 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 and increasing each year in line with inflation.

But as different schemes calculate transfer values in different ways, the values quoted by a scheme could be significantly different to that tracked by the index, the firm cautioned.

carmen.reichman@ft.com