Defined benefit (DB) scheme transfers are 50% down from pre-pandemic levels, according to a report by Barnett Waddingham, as fewer members are requesting quotations.
According to the Barnett Waddingham analysis, over the past four years there has been a 20% fall in the number of transfer quotations issued, contributing to a 50% fall in the number of transfer values paid.
It showed that the second quarter of 2023 was the third lowest quarter for the number of quotations issued since Barnett Waddingham started analysing data back in 2019.
The only other quarters that saw a lower number of quotations issued were the second quarter of 2020 and the fourth quarter of 2022, which fell during periods of “extraordinary market volatility” due to the first lockdown being announced and the mini-budget in September 2022, respectively, during which many schemes chose to suspend quotations.
Barnett Waddingham speculates that the trend of falling transfer value quotations is due to changes introduced by the Financial Conduct Authority in October 2020, which included a ban on contingent charging.
However, it added that the significant recent fall in quotations can more likely be attributed to the material falls in transfer value amounts over the past year following the rise in Gilt yields.
Liam Mayne, partner at Barnett Waddingham, said: “Considering the drastically changed landscape, sponsors and trustees should reassess whether their existing approach to supporting and engaging members are still likely to meet their objectives.”
Mayne added that any decision to scale back the support provided will need to be “weighed against the positive impact that a well-designed transfer process can have on member outcomes”. He said this is something that is of “particular importance amid the ongoing cost of living crisis”.
PLSA recommends policy measures to reduce risk of over-saving
The Pensions and Lifetime Savings Association (PLSA) published five recommendations that could be used to reduce the risk of over-saving ahead of the introduction of the auto-enrolment extension.
The auto-enrolment extension bill has recently passed a second reading in the House of Lords, and is due for committee stage reading which will involve line-by-line examination on 12 Septemebr 2023 before it can receive Royal Assent.
The bill aims to lower the age limit for auto-enrolment to 18, as well as remove the £10,000 earnings limit for contributions.
Ahead of the bill going live, the PLSA commissioned the Pensions Policy Institute (PPI) to examine the profiles of employees earning less than £10,000 to investigate whether the auto-enrolment extension could provide a way of improving their retirement outcomes.
The research looked at characteristics of low earners, and who could be at risk of over saving if the auto-enrolment triggers were removed.
The findings of the research indicate that eliminating the auto-enrolment trigger for individuals earning less than £10,000 has the potential to improve retirement outcomes by 7-13% for nearly three million people.
However, 9.5% of around 300,000 people out of 3.17 million of low earners could be at risk.
Therefore, before the policy can be recommended, the association said that further consideration must be given to the group of low earners at risk of over-saving to ensure they can afford to save more.
It said that if it were decided to bring this group within auto-enrolment, there are a number of policies that could be used to reduce the risk of over-saving, and all would need to be carefully considered and tested before a change in the regime.
Further research on low earners, the needs of under-pensioned workers more generally, and the intersectionality of different characteristics are needed before a final decision could be made on whether to amend the current £10,000 earnings threshold, PLSA said.
Nigel Peaple, director of policy and advocacy at the PLSA, said: “The £10,000 earnings threshold for automatic enrolment was employed to protect workers on the lowest earnings from saving for the future when they might be better off having more money in their pockets today.
“However, the existence of the threshold does result in certain groups, notably women and carers, having lower pensions than average.”
Smart Pension partners with Punter Southall to launch annuity comparison tool
Smart Pension has partnered with Punter Southall to launch ‘Pension Potential’, an annuity comparison tool to help its 1 million plus members maximise their retirement savings and make informed decisions about researching, comparing and buying annuities.
Smart Pension, which manages more than £4bn in assets on behalf of more than one million UK savers and provides pensions to over 70,000 employers, now offers the tool to its members to guide them through every annuity on the market and understand what it means for them personally.
The tool was developed by Punter Southall in anticipation of the growing demand for online solutions.
Eve Read, senior director of strategic delivery at Smart Pension, said: “The nature of retirement is changing and fast. We know people want to be in control of their finances, but rising interest rates and rising costs of living are changing the landscape for many savers approaching their retirement.”
She said Smart Pension is continuing to build on its retirement proposition, Smart Retire, so members have flexibility and control in retirement, adding that retirement is “complex” and people need help if they are to make the most of their savings.
She continued: “Annuities now play a more important role in retirees’ financial management and we believe it’s important to provide our members with a full market annuity broking service.”
Steve Butler, chief executive officer of Punter Southall’s Aspire business, added: “For decades, we have strived to make pensions clearer and easier for everyone. In this case, savers can now see in seconds what a guaranteed income in retirement means for them.”
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