Close to 8,000 people transferred out of defined benefit schemes and into defined contribution between Q3 2015 and Q1 2016, figures from the Financial Conduct Authority show, but experts estimate the numbers may be even higher.
Transfers have had increased appeal since the introduction of freedom and choice in April last year increased options for DC savers. More recently, increased transfer values have boosted appeal.
Responding to a freedom of information request, the FCA revealed 2,737 people transferred in Q3 2015, 2,239 in Q4 and 2,817 in Q1 2016. It noted that data collection relevant to DB to DC transfers only began at the end of June 2015.
Small schemes with no transfers in five years have had six in the past 12 months
Hugh Nolan, Spence & Partners
However, it added that the figures did not include transfers where the DC scheme transferred into was trust-based, such as a mastertrust, and excludes about 5 per cent of contract-based scheme as well as those not in the UK.
Despite the lack of public data, consultants said proprietary data and personal experience pointed to significant growth in DB to DC transfers.
Hugh Nolan, director at consultancy Spence & Partners, said the type of transfers had “changed dramatically” since the introduction of freedom and choice.
“Small schemes with [no transfers] in five years have had six in the past 12 months,” he said. “Between half a million to a million pounds.”
The majority of those transferring are approaching retirement, Nolan added, as transfers do not tend to take place until the potholder is in a position to take advantage of freedom and choice.
“It’s all in the 55-60 age bracket. The same pattern is repeating itself across a lot of schemes I know of,” he said.
Transfers 'have roughly doubled' in two years
Evidence of transferred pots being at the larger end was also mentioned by Ben Roe, partner at consultancy Aon Hewitt.
He said internal data showed the amount of money being transferred from DB to DC had roughly doubled since 2014.
“It jumped a level in Q3 2015 and since then has been steadily increasing,” he said.
Matthew Demwell, partner and UK head of member options for consultancy Mercer, said data from the company showed transfers of around 2,500 over the period Q3 2015 to Q1 2016. Mercer administers pensions for around 1m people.
“This makes the FCA number very low,” he said, adding that while the Mercer data did not reflect what type of arrangement the pot was being transferred into, it was unlikely many DB schemes were accepting transfers-in.
Keep comms 'balanced' as DB transfer interest is up
Advisory service Intelligent Pensions has seen the number of defined benefit transfer requests it has processed increase during 2016 as members seek to take advantage of the freedom and choice reforms.
Partial transfers
Tom McPhail, head of pensions research at investment platform Hargreaves Lansdown, said steps could be taken to ease the latent demand for transfers.
“One of the things we’ve been looking at is whether people should be allowed to do partial transfers,” he said.
While a partial transfer could be technically complicated, the fact that the decision to transfer is a non-binary one could be encouraging savers to move pots, he said.
McPhail added that standardising transfer statements could make calculating values much cheaper and faster.
