Transfer values fall again as scam flags continue to register in more than 9 out of 10 requests
Transfer values fall again as scam flags continue to register in more than 9 out of 10 requests
22 Sep 2022
Month-end transfer values finished below £200,000 for the first time since records began in June 2016, according to XPS Pension Group’s Transfer Value Index. The Transfer Value Index showed an illustrative average value of £197,000, over £70,000 below the high seen only eight months previously. Long-term inflation expectations have been largely stable over recent months, meaning the continued fall in the index over 2022 is attributable to a gradual uptick in long-term gilt yields, which reached 3.3% per annum at the end of August.
91% of cases reviewed by the XPS Scam Protection Service in August were deemed to contain at least one scam warning flag, according to XPS’s Scam Flag Index continuing the trend of over 9 in 10 cases reviewed raising flags. Overseas investments in the receiving scheme continues to be the most common flag identified.
XPS’s Transfer Activity Index recorded an annualised rate of 38 members per 100,000 transferring their benefits over the month. This represented a slight drop in activity from the increase during July but was still the second-highest rate registered since March.
Mark Barlow, Head of Member Options, XPS Pensions Group, said: “Rising gilt yields have meant that many transfer values on offer are now lower than at any point in the last five years, including during the market shock caused by the emergence of the pandemic. Whilst some pension scheme members may decide whether to transfer based on prevailing market conditions, others may be driven to transfer out of necessity during the current cost of living crisis.”
Helen Cavanagh, Client Lead, Member Engagement Hub, XPS Pensions Group, added: “We have very much entered a phase of continued high scam warning flag volumes as the full impact of the transfer regulations are being felt. MoneyHelper has, so far, dealt well with managing appointments due to the increased volumes of referrals. However, in our view we would see far fewer referrals if overseas investments in the receiving scheme was not an amber warning flag.”
Chart 1 - XPS Transfer Value Index
Chart 2 - XPS Transfer Activity Index
Chart 3 – XPS Scam Flag Index
Table 1 – Transfer Watch over the past 12 months
Source: XPS Pensions Group – All data is at the end of each month.
XPS Transfer Watch is part of XPSArena, a free to access destination for learning support and development for people in pensions. Users will be able to scrutinise the latest data contributing to the headline Scam Flag Index, with filters available to compare warning flag prevalence over time and by several demographic groupings.
Notes
XPS Transfer Watch monitors how market developments have affected transfer values for an example member, as well as how many members are choosing to take a transfer value.
XPS Pensions Group’s Transfer Value Index shows the estimated Cash Transfer Value of a 64-year-old member with a pension of £10,000 a year with typical inflation increases. The value changes over time with market movements. Mortality assumptions are reviewed periodically.
XPS Pensions Group’s Transfer Activity Index, (the bars on the chart) represent the annualised proportion of members that transfer out of pension schemes administered by XPS. If replicated across all private sector, funded, UK, DB schemes this indicates that approximately 50,000 DB members leave their schemes each year
XPS Pensions Group’s Scam Flag Index tracks the percentage of monthly transfers reviewed by the businesses’ scam protection service that are identified as having warning ‘flags’ which indicate that the member is at risk of being scammed. The flags monitored include both the DWP’s set list of amber and red warnings and further areas of concern identified and monitored by XPS’ Scam Protection Service. The service is provided to the Trustees of approximately 350 occupational pension schemes.