Transfer values, as measured by the Xafinity Transfer Value Index, have reached new highs since the vote to leave the European Union.
On 30 June 2016 the Xafinity Transfer Value Index stood at GBP223,000. The highest reading of the Index in the whole of 2015 was GBP214,000 – the Index is therefore currently more than 4% higher than the highest reading in 2015.
The Xafinity Transfer Value Index tracks the transfer value that would be provided by an example DB scheme to a member aged 64 who is currently entitled to a pension of GBP10,000 each year starting at age 65 (and which increases each year in line with inflation).
The increase in transfer values has been largely driven by significant reductions in Gilt yields since the results of the vote were announced.
Paul Darlow of Xafinity says: “Whilst these reductions in Gilt yields are good news for members looking to take a transfer value of their defined benefits, it is not good news for pension schemes themselves. Most pension schemes will have seen their deficits increase significantly. Pension schemes should consider whether paying out significant amounts of transfer values when deficits are high, and asset values are perhaps depressed, could have a detrimental impact on the financial position of the scheme.”
