Pension transfer values end February unchanged from January

Hannah Godfrey reports...

Defined benefit pension transfer values increased broadly throughout February, before dropping sharply to end unchanged over the month, according to the XPS Pensions Group Transfer Value Index.

The index ended February at £235,000 – the same as at the end of January. The difference between maximum and minimum readings through the month was £5,100, or around 2.1%.

February’s volatility was similar to that observed in January, when the value as displayed by the index moved up and down throughout the month, before ending at £235,000 – again, the same value as the end of December.

XPS’s index tracks the transfer value that would be provided by a hypothetical defined benefit (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 said: “The transfer value index increased to nearly £240,000 during February before suffering a sharp fall back to £235,000 in the last few days of the month. A combination of increased inflation expectations and reduced gilt yields were the reason for the rise in the index initially in February, with increased gilt yields at the end of the month bringing the index back in line with the start-of-month position.

“The volatility observed in February was similar to January, but lower than that experienced at the end of 2018. During March 2019, there may be more volatility in market conditions as the negotiations regarding Britain’s exit from the EU continue with the 29 March deadline approaching.”