DB transfer take-up and quotation rates remain close to historically low levels – LCP
Pensions & benefits DB pensions
The rise in gilt yields and the subsequent fall in transfer values are behind the fall in DB transfer take-up rates, according to LCP’s latest quarterly analysis of the DB transfer market.
Take-up rates stand at 4% for Q2 2023, the last quarter for which there is full data. This is the second lowest figure since the analysis was started ten years ago. The previous quarter saw the all-time lowest take-up rate of 3%.
The low take-up rate coincides with low average transfer values. For quotations provided in Q2 2023, the average transfer value paid was £198,000, which is the lowest figure since Q1 2014.
Other findings in the analysis are:
- In Q4 2023, the average quoted transfer value was £143,000 - this is the lowest figure since LCP started their analysis in 2014 and coincides with high government bond (gilt) yields.
- In the 12 months to 31 December 2023 LCP administration teams provided transfer value quotations to 3.8% of deferred members, with a value of £227m in total. This compares to 4.2% and £317m in the 12 months to 31 December 2022. Overall transfer quotation activity remains significantly lower than the peak in activity seen in 2017 when almost 8% of deferred members requested transfer quotations with a total value of £778m.
- In Q2 2023 the total value of payments in respect of quotations was £4m with an average size of £198,000; in comparison to the peak for quotations provided in Q1 2017 where £92m paid out with an average size of £627,000.
Avneet Gill, Associate Consultant at LCP, commented: “For many years, the average transfer value paid for a DB pension was around twice the size of the average UK house price. With the recent sharp falls in transfer values, for the first time in 10 years, the average transfer value paid out is now back to being broadly in line with the average UK house price.”