• Total value of pension transfers rises to £8.6billion in Q3 2018 (£8.3bn in Q2 2018)
• However, this is down from a high of £10.5billion in Q1 2018
• Activity expected to decline over the long-term as advisers exit the market
Tom Selby, senior analyst at AJ Bell, comments:
“Savers dashing to exit their defined benefit pension schemes has been one of the big stories of 2018, with the collapse of big-name sponsors like BHS and attractive transfer values tempting savers to swap stability for flexibility.
“The pension freedoms – and particularly the generous tax treatment of defined contribution pensions on death - may also have played a part, while many will inevitably have been tempted by the stellar returns on offer in recent years.
“Those who transferred in the hope of making a quick buck on the markets will have faced a rude awakening this year as stocks have tumbled in value.
“Transferring can be a perfectly sensible move in the right circumstances but anyone taking this step needs to fully understand the risks involved.
“Over the longer term we expect the volume of transfers to decline, partly as a result of advisers exiting the market as the FCA tightens its focus on the market. Rising insurance costs will also likely push many advisers away from business that is deemed risky by PI firms.
“Despite that, the decline of DB is likely to be a story that runs through into 2019, particularly as once mighty high street giants struggle desperately to make ends meet.”
Source: Office for National Statistics - Investment by insurance companies, pension funds and trusts (MQ5)
https://www.ons.gov.uk/economy/investmentspensionsandtrusts/datasets/mq5investmentbyinsurancecompaniespensionfundsandtrusts
Note: Figures quoted are from section 4.3 – self-administered pension funds income and expenditure - Row 62 (‘Transfers to other pension schemes’).
