The number of defined benefit (DB) pension transfers in the UK fell to a record low last month amid continued market uncertainty created by the coronavirus crisis.
XPS Pension Group's Transfer Activity Index shows that the number of completed transfers fell to an annual equivalent of 0.58% of eligible members in April, down from the previous record low of 0.76% in March.
This represents just under six in every 1,000 eligible members transferring, while requests for transfer value quotations were found to have fallen by just over a third compared to last April.
“The ongoing COVID-19 crisis has predictably caused a dip in transfer activity,” said XPS Pension Group partner Mark Barlow. “The record fall will be a result of some schemes putting a temporary halt on transfers, as well as members being less inclined to transfer in such uncertain times.
“We may see a rebound in activity as we emerge from lockdown, although the observed decline in requests in April suggests that any upturn will be some months away, due to the lag between transfer requests and completions.”
Despite the fall in transfer activity, the researchers found that valuations experienced a much more stable April, increasing by around 3% over the month.
XPS Pensions Group’s Transfer Value Index increased from £242,600 at the end of March, to £249,300 at the end of April, driven by a fall in gilts yields, which was partially offset by a smaller fall in inflation.
This comes after The Pensions Regulator (TPR) issued guidance advising trustees to write to DB members explaining the risks of transferring, and urging them to consider the decision carefully.
“The regulator’s updated guidance continues to focus on the risks associated with defined benefit transfers, particularly the heightened risk of pension scams in the current environment,” Barlow continued.
“The letter to members will help some to think twice before falling victim to a pension scam, although trustees should not think this is the complete solution.”