Pension transfer values dropped to their lowest level in over a year in Q2 2018, marking the first quarter-on-quarter decrease in two years, according to figures released by the Office for National Statistics (ONS).
The value of pensions transferred in 2Q18 was £8.2bn ($10.8bn, €902bn), down 23% from £10.6bn the previous quarter.
Before the record-breaking first quarter of 2018, there had been suggestions that pension transfer peaked in 2017.
Tom Selby, senior analyst at AJ Bell, said: “Savers have been rushing to the defined benefit exit door in their droves since the pension freedoms were introduced, attracted by a combination of alluring transfer values and the flexibility on offer in defined contribution scheme.
“Negative headlines surrounding the failure of some DB sponsors, most notably BHS and Carillion, have added to this heady cocktail.”
While DB transfers can be in a saver’s best interest, “if, for example, they are in ill health or want to prioritise leaving money to loved ones after they die”, Selby warns that the FCA has been “turning up the heat on advisers acting in this market”.
“There have also been reports of insurers jacking up premiums where advisers are carrying out this work – a pincer movement which has unsurprisingly seen many advisers pull out of the market.
“With DB transfers requiring advice to be taken where the pension is valued at £30,000 or more, this supply constraint could well be pushing down activity in the market,” Selby said.
“For anyone considering quitting their DB scheme or who has done so already – it is crucial they understand the risks associated, take an active role in planning their retirement and, ideally, seek ongoing help from a regulated financial adviser.”
