Pension transfer values recover after February dip – XPS

By Jenna Brown

Defined benefit (DB) pension transfer values recovered by about a third last month after February’s sharp fall, according to figures from consultant XPS.

The firm’s monthly transfer commentary said March’s recovery was largely due to rising expectations of future inflation increasing the expected value of members’ pensions.

It said its Transfer Activity Index had remained stable and transfers that raised alarm bells – monitored through its Red Flag Index – showed a small decline to just over half of all transfers raising questions.

Consultant Helen Cavanagh said: “We are pleased to see the continued fall in the Red Flag Index. However, more than half of cases are still showing warning signs that could indicate a scam, or at the very least, the potential for poor member outcomes. This remains much higher than the level of red flags we were seeing before the pandemic.”

The statistics follow the release of the Financial Conduct Authority’s (FCA) final guidance for firms advising on pension transfers, setting out its expectations and highlighting examples of poor practice.

Alongside this, the FCA published a joint guide with The Pensions Regulator (TPR) for employers and trustees looking to support members without straying into advice.

Partner Mark Barlow commented: “The joint guide from the FCA and TPR provides welcome clarity for the many schemes who want to help their members when they’re considering a life-changing decision like whether to transfer their pension. It is particularly helpful to see the guide acknowledging the valuable role that employers and trustees can play in supporting members in accessing high-quality financial advice.”

Cavanagh added: “Our scam protection service is identifying many cases which are described as being ‘poor practice’ in the new FCA guidance. We are also seeing that the additional disclosure requirements introduced last year are not being met by some advisers, and we hope that this guidance will help to increase standards.”

XPS Pension Group’s Transfer Watch monitors how market developments have affected transfer values for a typical pension scheme member. It also monitors how many members are choosing to take a transfer from their DB pension scheme and, through its Red Flag Index, the incidence of scam red flags identified at the point of transfer.