The UK’s Office for National Statistics (ONS) has revealed that the volume of pension transfers continuously dropped throughout 2018.
In fact, during the first quarter of 2018, the ONS recorded over £10bn ($13.1bn, €11.5bn) in pension transfer volumes, compared to just over £6bn in Q4.
Since the introduction of pension freedoms in April 2015, around £92bn has been transferred.
Exit stage left
According to investment platform AJ Bell, this trend is very much attributed to people quitting their defined benefit (DB) pension schemes, as well as the drop in the number of people under financial advice.
“The latest official data from the ONS suggests we may well have passed the peak point when it comes to pension transfer activity,” said Tom Selby, senior analyst at AJ Bell.
“Nonetheless, it is hard to overstate the magnitude of what we have witnessed since the pension freedoms were introduced, with almost £100bn of retirement pots transferred by the end of 2018.
“The vast majority of this activity is likely to be savers ditching their defined benefit schemes in favour of the flexibility of defined contribution.”
Contributing factors
He continued: “A number of factors are contributing to the recent slowdown. The Financial Conduct Authority’s increased focus on the market has undoubtedly had an impact, forcing a number of advisers to exit the market.
“Rising insurance costs for advisers is also affecting supply, with a knock-on impact on the volume of transfers taking place,” Selby added.
“There were also some significant cases – most notably British Steel – that have skewed transfer volumes upwards in recent years.
“The number of transfers will naturally edge lower as the population of members in DB schemes dwindles. Over time, as DB schemes disappear from the retirement landscape, we are likely to reach a point where guaranteed employer-sponsored pensions are practically non-existent in the UK.”
Source: Office for National Statistics
