Defined benefit transfer values decreased over 2022 as gilt yields increased due to investor concerns about UK debt, according to XPS Pensions Group.
The Transfer Value Index for XPS Pension Group decreased by 4 per cent in December. The tracker indicates that over the course of the year, transfer values decreased overall by 36 per cent as a result of sharp increases in gilt yields.
According to XPS, the risk of a recession in 2023 and investors’ worries about how inflation will affect the country’s economy have both contributed to a substantial increase in UK gilt yields during 2022. The value of a defined benefit pension at transfer is significantly influenced by gilt yields.
In 2022, the demand for transfers decreased along with transfer values. According to the Transfer Activity Index published by XPS Pension Group, there were 44 members transferred for every 100,000 people in 2022 on average, down from 62 for every 100,000 people in 2021. After a rise in November, the numbers for December 2022 were in line with annual averages.
XPS Pensions Group head of member options Mark Barlow says: “Transfer values have plummeted over the last year, which will be a cause of concern for many members. It makes access to high-quality support and advice more important than ever before members make potentially irreversible decisions that could impact their retirement. However, it’s reassuring that, as yet, we have not seen a sustained trend of more members transferring due to cost-of-living pressures.”