Pension transfer values see further volatilty in January

Hannah Godfrey reports...

Defined benefit pension transfer values fluctuated during January 2019 but ended the month with no overall change, according to the XPS Pensions Group Transfer Value Index.

The difference between maximum and minimum readings across the month was £6,800, or around 2.9%. Despite the ups and downs throughout the month, the index ended January at £235,000 – the same value as the end of December.

The volatility in January followed an even more erratic December, when the index dropped by 2.3% in what proved to be the most volatile month since September 2017.

XPS’s index tracks the transfer value that would be provided by a hypothetical DB scheme to a member aged 64 who is entitled to a pension of £10,000 each year, starting at age 65. It increases each year in line with inflation.

XPS Pensions Group head of DB growth Sankar Mahalingham (pictured) said: “Transfer values rose over the first half of January, suffered a sharp fall mid-month, before then increasing gradually towards the end of the month. The reason for the mid-month fall was due to lower inflation expectations, with reducing gilt yields towards the end of the month bringing the index back in line with the start of month position.

He added: “While there was some volatility observed in January, it is lower than that experienced in December 2018. It is possible that there will be more volatility in coming months as various UK and global political events continue to unfold.”