Pension switch exercise hits 5 yr low

Pension switch exercise has continued its downward decline, hitting a 5 yr low in July and dropping to half the extent seen a yr earlier.

In July solely 19 members per 100,000 transferred their pensions out of their present scheme to another, in accordance with the XPS Pension Teams’ Switch Exercise Index.

XPS says the determine represents the bottom degree of exercise seen because the Switch Exercise Index was first revealed in Could 2018 and is roughly half of the extent measured this time final yr.

The FCA has tightened guidelines on pension transfers in current occasions within the face of a wave of agency failures and questions concerning the high quality of recommendation. Nonetheless, pension transfers stay a key element of many monetary plans, says XPS.

Helen Cavanagh, a shopper lead at XPS Pensions Group, stated: “Switch exercise ranges have declined dramatically over the previous 5 years, and this pattern could have been additional compounded by more moderen falling switch values. Nonetheless, we’re nonetheless seeing that almost all transfers are made as members method their retirement and it’s clear that transfers stay an essential a part of the retirement decision-making course of for a lot of.”

The XPS Pension Group’s Switch Worth Index – measuring the common worth of transfers – continues to stay secure, ending the month at £161,000, much like the earlier month. XPS says this is because of fewer modifications in gilt yields and long-term inflation expectations over the previous few months, in comparison with extra vital actions in 2022 and the beginning of 2023.

Some 93% of circumstances reviewed by The XPS Rip-off Safety Service in July raised at the very least one rip-off warning flag, in accordance with XPS’s Rip-off Flag Index. Whereas the determine represents a slight fall in comparison with June, it continues the extended pattern of this index remaining above 90%.

• XPS Pensions Group’s Switch Worth Index exhibits the estimated Money Switch Worth of a 64-year-old member with a pension of £10,000 a yr with typical inflation will increase. The worth modifications over time with market actions. Mortality assumptions are reviewed periodically.

XPS Switch Watch over the previous 12 months

Supply: XPS Pensions Group – All information is on the finish of every month