XPS Pensions: Up to 1.5% of eligible members quitting DB schemes each month

Holly Roach reports...

XPS Pensions has combined its transfer value index and its transfer activity index to create a transfer watch service to understand the trends and behaviours of members accessing the pension freedoms.

The new monthly index tracks the number of members leaving schemes and the value of pension transfers.

The index, which will be issued in the second week of each month, revealed that while transfer values remain high, the number of transfers is also significant. Due to current low yields, XPS suggested members are more likely consider leaving their schemes so these numbers will remain high.

It showed around 1%-1.5% of eligible members left the schemes administered by XPS each month up to April 2019, which, although a small percentage, is a significant number of individuals. If this trend repeated across all defined benefit schemes, XPS said it would result in around 50,000-70,000 members leaving schemes each year.

XPS said there has been a steady decline in activity since mid-2018. It said that this is a consequence of a slow down after a rush of transfers over 2018 due to greater member awareness and actions taken by regulators, employers and trustees to better support and protect members.

The consultant added there was a significant dip in activity in December, which it believed may have been linked to schemes pausing transfer values whilst they got to grips with the complications arising from GMP equalisation.

Despite this, it said it expected activity levels to remain significant going forward given the attraction of relatively large transfer values and pension freedoms.

Senior consultant Mark Barlow said: “We are excited to launch transfer watch today giving clear insights into activity. This is a key part of our focus on helping members achieve good retirement outcomes.”