There has been a slight improvement in satisfaction levels experienced by savers choosing to transfer out of their defined benefit scheme for the first time, according to XPS Pensions.
The pension consultancy’s survey on member outcomes, published last week (June 8), found member outcomes improved as a result of individuals transferring to less expensive self-invested personal pensions (Sipp).
However, concerns remain that too many savers are transferring to a Sipp in the first place despite this not being the best option, the firm warned.
XPS Pensions found out of 2,200 members, 98 per cent had transferred to a Sipp between April 2019 and March 2020, despite the majority not necessarily needing the additional features that a higher charging Sipp provides.
The survey also found the average transfer value was £290,000, an increase of around 5 per cent since last year.
Mark Barlow, partner at XPS Pensions, said: “The coming months will be particularly challenging for pension scheme members. A transfer could look very attractive in the current economic environment, but there will be many risks associated with this option.
“It is very important that trustees and sponsors assess how vulnerable their members may now be and use this to tailor support.
“For some a low cost employer destination vehicle may allow people to access flexibility they may soon need without incurring substantial pension charges.”
According to XPS Pensions, the typical transferring member is healthy, financially secure and better at using online technology than the average DB pension scheme member.
XPS Pensions remains of the view that more needs to be done to improve outcomes for members but is concerned this will be made more difficult in the future as advice in this area becomes harder to obtain.
Over the next year, it is expected that more schemes will look to appoint advisers to help members when making decisions.
According to the firm, it is also likely schemes will take steps to improve the quality and frequency of member communications with many expected to increase their online presence on the back of the Covid-19 crisis.
Schemes could also be seen to make the option of a partial transfer more widely available as well as look to provide access to a low-cost scheme for savers to transfer into.
The Covid-19 effect
XPS Pensions found the value of transfers had increased following Covid-19, but there was a 20 per cent reduction in the number of transfers processed in May 2020, compared with the same time last year and a 30 per cent drop in requests for a cash equivalent transfer value.
However, transfer activity is set to rebound as lockdown measures continue to be loosened and members look to their pensions for financial help, according to the firm.
What do you think about the issues raised by this story? Email us on email@example.com to let us know.