DB pension scheme members transferring out of their final salary pension have seen their fees rise by 10 per cent, increasing their chance of running out of money up to ten years earlier, according to figures from XPS.
Ongoing fees paid by savers transferring from defined benefit (DB) pension scheme in the year to 31 March 2021 increased by 10 per cent, from 1.7 per cent per annum to 1.9 per cent a year, according to the latest annual survey from XPS Pension Group’s Member Outcomes survey.
Higher fees, which includes financial products and financial advice charges, were also experienced, resulting from an increase in the average transfer value. 23 per cent less members transferred out over the year but the average transfer value paid increased by 29 per cent to £375,000 due to members with the largest values transferring out.
The survey found that 99 per cent of members transferred to a Self-Invested Personal Pension (SIPP), with fees ranging from 0.7 per cent per year to over 3.0 per cent a year.
Members could make their retirement fund last another ten years if lower cost workplace pension schemes or master trusts are considered as well as access to financial advice says XPS.
XPS head of member options Mark Barlow says: “The slowdown in transfer activity over the last 12 months is unsurprising since most of the year was spent in lockdown. Interestingly, it’s been those with the largest values who have continued to transfer. This, together with the reduction in choice for members transferring, may explain why average charges have increased by 10 per cent since last year.
“We’ve been encouraged to see trustees and employers step up support, with 50 per cent of members of schemes we work with now having access to enhanced support, up from 31 per cent last year. However, the pent-up demand from fewer transfers and retirements means there’s likely to be an increase in members considering their options soon. As a result, it’s as important as ever that trustees and employers take steps to improve the support they provide and ensure the best outcome possible for their members.”
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