Pension transfers fall by 20% in Q4 2018

Pension transfers dropped from £8bn to £6.3bn in Q4 2018, a decrease of 20 per cent, according to the latest Office for National Statistics (ONS) figures.

The number is also £4bn down on the £10.3bn transferred in Q4 2017, as the industry sees a slowdown in activity across the board.

According to the ONS, £92bn has been transferred since pension freedoms were launched in April 2015. The latest quarterly figures are the lowest since the £4bn recorded in Q4 2016.

Commenting on the figures, AJ Bell senior analyst, Tom Selby, said: “The latest official data from the ONS suggests we may well have passed the peak point when it comes to pension transfer activity.

“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.”

Selby added that the slowdown in activity is to be expected, as the advice supply drops and the number of defined benefit members fall.

“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.”

According to LCP, take-up rate of defined benefit transfers remained stable at 30 per cent in the 12 months to June 2018, despite a decline in quotation rates.

Quotation rates fell to 6 per cent of deferred members in 2018, its lowest rate since Q3 2016, and compared to 8 per cent over 2017, as concerns around the quality of member advice continues.

Despite this, take-up rates improved by 2 per cent on the 28 per cent recorded for the 12 months to June 2017, and were highest for older members who recorded a 37 per cent take up rate for members aged 55 and over.

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