DB transfer values climb in January

Hannah Godfrey reports...

Defined benefit (DB) transfer values rose nearly 3% from the end of December to the end of January, according to XPS pension Group’s transfer value index (TVI).

The TVI climbed £7,000 from £238,800 at the end of December to £245,800 at the end of January, reversing the trend of declines experienced in the last quarter of 2019.

XPS said the movement was driven by a 0.3% fall in gilt yields over the month, which was partially offset by a smaller fall in inflation expectations.

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.

Elsewhere the firm’s Transfer Watch, which monitors how market developments have affected transfer values for an example member, as well as how many members are choosing to transfer away from schemes XPS administers, recorded another increase in the number of transfer completed in January, to an annual equivalent of 1.03% of eligible members, up from 0.91% in December 2019.

XPS Pensions Group head of member options Helen Ross (pictured) explained: “The marked increase in transfer activity is likely due to the elimination of some of the political uncertainty plaguing the markets over the last year, which may have been putting members off making big financial decisions.

“We are regularly asked whether there is any evidence of a surge in DB transfers as members try to beat a possible ban on contingent charging this year, but this is not strongly suggested by the numbers of members transferring from XPS administered schemes, but this may well materialise.”