DB pension transfers are declining rapidly, in the wake of the Covid-19 pandemic.
New data from LCP shows that member interest in transfers is at its lowest level since 2014, before the introduction of ‘pension freedom’ rules.
The number of requests for transfer value quotations had declined over 2019, compared to 2018, but this trend has accelerated since the start of the Covid-19 lockdown.
LCP analysed data from around 80 DB pensions schemes it administers. In January and February, a typical week saw 40-50 scheme members request a transfer value. This number has been falling steadily since the start of March, with volumes now down by more than three quarters.
LCP says there are a number of reasons for this significant decline, not least the fact that the major disruptions cased by the lockdown have given many people more pressing things to think about than their pensions.
However it noted that members may now attach more weight to the relative certainty of a DB pension compared with a DC pensions, which are invested in a range of assets and vulnerable to sudden stock market corrections.
LCP points out that many IFAs may be offering advice due to the lockdown, which may have led to fewer inquiries about transfer values
A significant number of DB schemes have put a temporary hold on providing transfer quotations to allow market volatility to settle down and give time to review their transfer value calculation bases in light of the latest developments.
This is likely to reduce overall transfer activity further for a period of time.
However, there are a few schemes where, in stark contrast, the pace of requests has held up, and for some even increased marginally.
These appear to be associated with situations where there may be particular concern amongst members about the financial strength of the employer in this crisis.
In these cases in particular scheme trustees and their administrators will need to watch out closely in the coming weeks for scammer activity.
LCP partner Bart Huby says: “Regulators are understandably concerned about the risk of people under financial pressure transferring money out of their pensions and being exposed to scams.
“But our data suggests that in the short term there has been a sharp drop in the number of people asking for information about transferring out of their salary-related company pension.
“This could reflect nervousness about market conditions or simply the fact that people have other things to focus on at the moment.
“What is not yet clear is whether transfer volumes will bounce back later in the year as schemes relax temporary restrictions on processing transfers and more members decide that they need to access their pensions to meet financial pressures”.
