The defined benefit transfer market is expected to stay subdued until the second quarter of this year when an easing of the lockdown and the ending of government support schemes may see savers turn to their pensions, according to LCP.
Latest analysis from the consultancy, published today (January 13), found the two months last year with the lowest number of transfer requests (April and May) coincided with the toughest restrictions, and none of the following months managed to reach the levels seen pre-Covid.
During the seven weeks of the first lockdown from March 2020 the 83 DB schemes administered by LCP saw a mere 21 transfer requests per week, creeping up to 31 requests by December. This was well below the 49 requests per week seen between January and March 15, 2020.
But Bart Huby, partner at LCP, urged schemes to be prepared for requests to spike in the coming months.
Mr Huby said: “2020 shows us there is a strong correlation between lockdowns and dips in DB transfer activity levels. As a result, we expect activity to remain subdued during the first quarter of this year.
“However, in Q2 a combination of greater financial pressure on households as furlough schemes end and a lifting of lockdown measures as vaccination coverage increases could combine to give a significant lift to transfer activity.
“If this happens, some schemes may need to be ready for a potential tsunami of requests.”
According to LCP, August and December – which typically see reduced levels of activity around the holiday periods – were particularly quiet in terms of transfer requests.
It said this could be linked to savers prioritising other concerns during these periods or placing a higher value on the security of a DB pensions during times of uncertainty.
In addition, members may also have delayed submitting requests when schemes temporarily suspended processing quotations during the first lockdown.
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