The three month period ending June 2023 was the third lowest quarter for transfer value activity, only beating two previous quarters impacted by extraordinary market volatility: the second quarter of 2020 during the first pandemic lockdown, and the fourth quarter of 2022 after the 'mini-budget' fiasco.
Barnett Waddingham’ analysis of cash equivalent transfer values (CETVs) showed that the number of members transferring out of defined benefit (DB) schemes halved when compared to pre-pandemic levels.
Liam Mayne, a partner at Barnett Waddingham, said20 per cent fewer members had requested a quotation, and the largest contributing factor was likely the significant falls in the values being placed on members’ pensions following rises in gilt yields after the Liz Truss mini budget last September.
CETVs have fallen roughly 10 per cent over the quarter to 30 June 2023, although transfer value amounts have stabilised over the quarter and settled at a level about 25 per cent lower than they were twelve months ago.
The pensions consultant said all IFA firms would need to consider how the upcoming Consumer Duty requirements from 31 July 2023 will impact how they provide DB transfer advice, which may result in some significant changes to their advice process.
Liam Mayne added: “Considering the drastically changed landscape, sponsors and trustees should reassess whether their existing approach to supporting and engaging members are still likely to meet their objectives. Any decision to scale back the support provided will need to be weighed against the positive impact that a well-designed transfer process can have on member outcomes, something that is of particular importance amid the ongoing cost of living crisis.”
