Take-up rates for transfers of DB pensions hit all time low while transfer values dip to 2015 levels
Pensions & benefits DB pensions
Latest analysis of the DB pensions transfer market by LCP shows that for Q1 2023, the latest quarter for which there is full data, only 3% of quotations have been taken up. This is the lowest rate seen since LCP began surveying the market in 2014, and part of a trend for falling take-up rates, down from a high of 34% in 2017.
For Q1 2023 quotations, the average transfer value paid out was £333,000, which is the second lowest figure since Q2 2015.
Lower quotations are continuing. In Q3 this year, the average quote value was £162,000, a decrease from the £181,000 average value recorded in Q2 and the lowest figure LCP have recorded since LCP started their analysis in 2014.
LCP believe that the main reason for the fall in take-up rates is likely to be the rise in gilt yields and the subsequent fall in transfer values. New anti-scam legislation, which came in last year, has led to delays in transfer values being paid out which may also be suppressing the Q1 2023 take-up rate.
Other key findings in the analysis are:
- Members with DB pensions continue to ask for transfer valuations. LCP’s administration team issued quotations for 1.3% of non-pensioner members in Q3 2023. This is a 30% increase from Q2 2023 where the figure was 1.0%.
- Analysis of LCP’s administration team’s work on this shows that 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 contrast, over the last year, LCP’s team have given transfer quotations to 3.8% of deferred members, with a value of £230m in total.
Avneet Gill, Associate Consultant at LCP, commented: “This dramatic fall in transfer values means that the option to take a transfer is looking a lot less attractive to members than it may have done a few years ago. Especially for those members who might have received a previous transfer value quotation or illustration and can see that the value has fallen sharply. “