A mix of rising unemployment and corporate insolvencies could lead to a significant increase in the number of defined benefits transfers early next year, LCP has warned.
Latest statistics from the consultancy, published today (December 10), showed the number of transfer requests dipped during the November lockdown, much the same as it did during the first nationwide lockdown in March.
Out of the 80 schemes administered by LCP, there were about 50 transfer quotation requests in a typical week before the first lockdown.
This dropped by half during the lockdown before levels recovered over the summer and early autumn, rising to around 37 per week.
However these numbers have fallen back to around 30 requests since the start of November.
Due to this, Bart Huby, partner at LCP, believes there could be a growth in interest in DB transfers as we enter 2021.
He said: “Interest in a potential pension transfer has been depressed during 2020, especially during the first and second lockdown periods.
“But 2021 may be very different and there is a real risk of a ‘gold rush’ of people looking to access their DB pensions.”
Mr Huby explained there could be several reasons for this.
Firstly, a range of government support mechanisms, such as the furlough scheme, will come to an end and there could be a surge in unemployment.
Secondly, it is expected that corporate insolvencies will rise significantly.
Mr Huby said this could lead to more people aged 55 or over to consider accessing their accrued pension rights.
He added: “Older workers who lose their job may be very tempted to consider accessing their DB pension in order to meet vital household bills.
“This makes it all the more important that schemes do what they can to help members access affordable and high quality transfer advice so that members can make a decision that is right for them.”
The regulator recently revealed (October 28) it had issued data request to IFAs who advised clients on DB transfers from the Rolls-Royce pension scheme.
The FCA, The Pensions Regulator and the Money and Pensions Service have been in talks with Rolls-Royce and its scheme trustees after a surge in the number of transfer requests as a consequence of redundancies at the company.
amy.austin@ft.com
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