DB transfer values see volatile end to 2018

Sophie King reports...

Defined benefit (DB) pension transfer values, as measured by the XPS Pensions Group Transfer Value Index, remained high during 2018 but saw a volatile end to the year.

During the last month of 2018, the firm’s pension transfer value index increased by 2.3%, but also experienced the most volatile month since September 2017. The erratic period followed a fall of values in November when the index dropped by 2.3%.

The difference between the maximum and minimum readings of the XPS Pensions Group Transfer Value Index over the course of 2018 was £17,000 (around 7%).

The index ended the year at £235,000, which would be the transfer value that an example DB scheme would offer a member aged 64, who is currently entitled to a pension of £10,000 each year starting at age 65 (increasing each year in line with inflation).

Despite the volatility across 2018, this figure is relatively unchanged compared with the index at the end of 2016, which was £234,000.

‘Volatility may continue’

XPS head of DB growth Sankar Mahalingham attributed the end-of-year volatility to changes in gilt yields, which dropped by almost 0.5% before recovering towards the end of December.

“Despite being relatively stable over the course of the year, transfer values suffered a volatile December,” he said. “This volatility may continue through the first quarter of 2019 as economic uncertainty around Brexit persists.”