The defined benefit transfer market is showing signs of recovery and is expected to grow further in the coming months following a sharp decline in inquiries due to the Covid-19 threat.
Analysis from consultancy LCP had shown a decline in the number of DB transfer requests at the end of March, when the nationwide lockdown took hold, but data for this month has shown a slow uptick in the number of inquiries.
Last week, the 81 DB schemes administered by LCP received 34 transfer requests.
This compared with an average of 21 requests per week between the lockdown announcement on March 23 and the gradual lifting of restrictions announced on May 10.
But the firm said while there were signs that activity was increasing, the current number of requests was still significantly below the average of 48 per week received in the 11 weeks before the lockdown announcement.
However, the firm said it was likely demand would grow in the coming months as financial pressures caused by Covid-19 will lead more over 55s to seek access to their funds.
Looking at volumes of transfer requests since the start of 2020, LCP found initial fears of a surge in transfer activity due to people being targeted by scams had not materialised, although it cautioned this did not mean individual schemes had not been targeted.
The first quarter of 2020 had seen a relatively high volume of DB transfer inquiries, up 20 per cent on the previous quarter.
Bart Huby, partner at LCP said: "We have seen the beginnings of a ‘u’ shape of activity around DB transfer inquiries so far this year.
“After a busy first quarter there was a clear ‘lockdown effect’ as interest in potential transfers dropped sharply. But in more recent weeks there are signs of a recovery in interest in transfers.
“It is possible that we may see a much higher level of inquiries later in the year as household budgets come under greater pressure, and The Pensions Regulator has warned trustees that they need to watch out for unusual or concerning patterns of transfer activity.”
But the firm warned these individuals may face difficulty in accessing affordable, high quality financial advice, especially if the FCA goes ahead with its delayed plans to abolish contingent charging for transfer advice.
Clive Harrison, partner at LCP, added: “A key challenge will be to ensure that scheme members can access balanced and affordable advice, especially if they are motivated by short-term financial pressures.
“It is also important to ensure members are aware of all their pension options as most schemes allow early retirement from age 55. We’re likely to see more trustees looking to improve communications and appoint an IFA firm to provide their members with the support they need.”
The FCA was set to publish its final policy statement on reforms to the DB transfer market, including proposals to ban contingent charging, in the first quarter of this year.
But with one week remaining to meet this deadline the FCA delayed its timeframe, with a policy statement now expected in the second or third quarter of 2020 as it looked to shed all "non-critical" work in the face of the coronavirus pandemic.