The number of people switching out of their defined benefit pensions reached a five-year low at the end of 2023, according to research by XPS Pensions Group.
According to XPS’s Transfer Value Index, there was a year-end rebound in transfer values despite a persistent fall in transfer activity. The quoted value of an average pension transfer jumped by more than 5 per cent in December and by 6.5 per cent in the last quarter of 2023 to £164,000. The decline in gilt yields in the last few months of the year is the main driver of this increase. The index saw two consecutive month-end rises in December for the first time since late 2021.
The XPS Scam Protection Service found scam warning flags in 90 per cent of instances it analysed in December. While transfer values are declining, over-55s continue to favour leaving defined benefit plans (DB) and are increasingly moving smaller pension pots—40 per cent of which are valued at less than £100,000—out of the scheme. Six people have incomes under £30,000, which necessitates independent financial guidance.
XPS Pensions Group head of member options Mark Barlow says: “Despite transfer volumes hitting record lows, our research highlights that transferring as part of wider retirement planning remains a popular option for those over age 55.
“Given that, it’s important that schemes provide support to members to help them make appropriate decisions for their circumstances. We are particularly concerned that a rise in smaller transfer values may put more of the most vulnerable members at risk of being scammed, as they are not required to take financial advice. Schemes should consider how they can best support these members as they begin to access their pension pots.”