DB transfers hit highest values in four years in March

Hannah Godfrey reports...

Defined benefit (DB) transfer values hit an intra-month four-year high of £251,000 in March, according to the XPS Pensions Group’s Transfer Value Index.

Transfer values last month broke a number of records in a month that, in addition to the highest intra-month peak, saw the highest month-end value and the largest monthly fluctuation since the inception of the index in April 2015.

The index peaked at £251,000 during March before losing some of those gains to end the month at £244,900 – an increase of £9,700 on the value at the end of February.

Over the first quarter of 2019, meanwhile, the index increased by £9,700, with the difference between maximum and minimum readings coming in at £18,700, or around 7.5%.

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 put the increase down to a fall in gilt yields.

“The movements in the transfer value index during March were largely driven by gilt yields, which fell by as much as 0.35%, and ended the month around 0.3% down,” he said. “Inflation also increased by as much as 0.15% but ended the month unchanged from the previous month end.

“Gilt yields were observed to drop markedly during the period from 19 to 22 March, around the same time as debate and votes in the House of Commons led to a change in the proposed Brexit date. It is likely that further Brexit-related development will continue to drive market movements for the foreseeable future.”