The end of 2023 saw the rate of people transferring out of their DB pension fall to a five-year low.
According to XPS Pensions Group, at the end of December, there was an annualised rate of 18 members in every 1,000 transferring their benefits to alternative arrangements, which is a new index low.
The continued fall in transfer activity come despite an end-of-year bounce in transfer values from October’s record month end low.
However, the firm's transfer value index showed the quoted value of a typical pension transfer increased by over 5 per cent in December, and by 6.5 per cent over the last quarter of 2023 to £164,000.
The primary driver for this rise was the fall in gilt yields over the latter months of the year.
Mark Barlow, head of member options at XPS Pensions Group, said: “Despite transfer volumes hitting record lows, our research highlights that transferring as part of wider retirement planning remains a popular option for those over age 55.
"Given that, it’s important that schemes provide support to members to help them make appropriate decisions for their circumstances.”
The firm said December marked the first time the index has seen two consecutive month-end increases since late 2021.
In November, defined benefit transfer values increased by 2.6 per cent to reach £156,000, the largest increase since March.
The research also found that 90 per cent of cases reviewed by the XPS Scam Protection Service in December raised at least one scam warning flag.
This represented no change since the previous month but the scam flag index remained high throughout 2023.
There was a slight dip in the second half of the year which may have been down to more members transferring to purchase an annuity.
Barlow added: “We are particularly concerned that a rise in smaller transfer values may put more of the most vulnerable members at risk of being scammed, as they are not required to take financial advice.
“Schemes should consider how they can best support these members as they begin to access their pension pots.”
XPS said the DWP published their 18-month review of the 2021 transfer regulations during the year and committed to working with the industry to consider if changes could be implemented to reduce unnecessary warning flags and improve the transfer experience for members.
sonia.rach@ft.com
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