There has been a 60% increase in the number of defined benefit (DB) pension members looking to ascertain the value of their benefits as new freedoms are applied to defined contribution (DC) schemes.
Data from consultancy Mercer showed that, during each month of 2014, around 1,500 people made enquiries into the value of their benefits.
However, in March 2015, some 2,500 people contacted the consultancy looking for a cash-equivalent transfer value (CETV) in the run-up to freedoms that came into force on April 6.
The UK government has consulted on whether to ban DB-to-DC transfers but decided to allow them to continue as long as members obtain independent financial advice.
It banned transfers from funded and unfunded public sector pension schemes.
Many consultants raised concerns over an influx of DB members leaving their schemes to DC options to access their pension entitlements as cash following the scrapping of rules to buy an annuity.
Matthew Demwell, partner at Mercer, said the current rate would lead to around 4% of DB members being administered by the firm seeking a CETV quote.
“It’s clear these changes have appealed to a number of people,” he said.
“However, these are just quotations. It remains to be seen how many people will actually accept the quotation and transfer out of their defined benefit scheme.
“This certainly represents an opportunity for employers and trustees to reduce the sometimes crippling burden of pension costs, but, clearly, to ensure people have enough in their retirement, the process must be carefully managed.”
In other news, JLT Employee Benefits has predicted the level of deficit contributions from FTSE 100 schemes will spike in 2015, given the number of triennial valuations being finalised and the continued low interest rate environment.
Around 30 firms in the FTSE 100 are set to have the valuations this year, and, with low interest rates pushing up liabilities, many companies could see trustees demand higher cash contributions, the consultancy said.
Companies contributed £14.1bn (€19.1bn) in the last accounting year.
Approximately £6.9bn of that was purely for deficit recovery, but the figure was lower than the £9bn reported the year previous.
However, total IAS 19 deficits in FTSE 100 companies came to roughly £80bn at the end of 2014, £26bn higher than at the end of 2013.
Charles Cowling, director at JLT Employee Benefits, said: “We expect to see some difficult negotiations between trustees and employers, and, inevitably, there are going to be demands for increases – potentially significant increases – in employers’ funding contributions.”
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