Defined Benefit  

Market turbulence causes further falls in DB transfer values

Market turbulence causes further falls in DB transfer values
(Pexels/ Alaur Rahman)

Defined benefit transfer values hit a record low in October due to continued falls in long-dated gilt yields, according to XPS Pensions.

XPS Pensions' transfer value index saw values hit £175,000 at the end of October, down 3 per cent from the previous record low of £181,000 at the end of September.

This represented a drop of 35 per cent compared to the index high of £270,000 in December 2021.

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However, transfer values recovered during the month from a record low of £148,000 on October 10 as long-dated gilt yields hit their peak.

Despite this, more people looked to transfer out during the month.

According to XPS, 48 members out of every 10,000 transferred their pension during October, the highest rate in 2022 so far.

Mark Barlow, head of member options at XPS Pensions Group, said: “Continued market volatility during October resulted in further turbulence for transfer values with the average values at their lowest level since we started the transfer value index. 

“Despite these falls in values, we are seeing an increase in members transferring during the month. Such an increase in transfers may be an initial sign that people are looking to draw their pension more flexibly to help them respond to the current cost-of-living crisis.”

Elsewhere, 96 per cent of cases reviewed by the XPS’s Scam Protection Service in October raised at least one scam warning flag.

Although this was slightly down compared to the previous month, the index continues to highlight that almost all cases reviewed raised flags, with overseas investment in the receiving scheme making up the majority.

Helen Cavanagh, client lead for member engagement hub at XPS Pensions Group, said the firm welcomed the announcement that The Pensions Regulator, the Financial Conduct Authority and the Money & Pensions Service have joined forces to highlight the increased risk of scams. 

Cavanagh said: “During this time of economic uncertainty, members may be more vulnerable to being exploited by scammers. With more members looking to transfer their pensions, trustees should remain vigilant to the risk of scams and ensure that they are acting to help prevent suspicious transfers and protect members.”

amy.austin@ft.com