This is the third edition of the XPS’ survey and considers the outcomes for 2,200 members who chose to transfer from the schemes XPS administer.
Key findings include:
1. The average transfer value was £290,000, an increase of around 5% since last year.
2. 98% of members transferred to Self-Invested Personal Pensions (SIPPs), a slight reduction from last year. This, together with a slight shift to the less expensive SIPPs, has resulted in a modest improvement in member outcomes.
3. 30% of schemes we work with have taken action to improve outcomes for their members.;
4. The typical transferring member is healthy, financially secure and more comfortable using online technology than the average defined benefit pension scheme member.
5. The value of pension scheme transfers have increased following COVID-19 and transfer activity has also started to pick up since April.
Helen Ross, Head of Member Options at XPS Pensions Group, commented: “It is encouraging to see some signs that outcomes are improving in light of the actions many pension schemes are taking to support their members. Perhaps at odds with what may be expected, we also found that the typical profile of a member leaving their DB pension scheme is healthy, financially secure and familiar with online technology. But most of this was before the impact of COVID-19. Financial pressures could see pensions transfers become more tempting to more members and particularly those that are less financially secure. The support and protection pension schemes offer will become critical. Understanding their membership in more detail, will enable schemes to tailor their support, particularly around communications and scam protection to best suit their specific member profiles.”
Mark Barlow, Partner at XPS Pensions Group, added: “The coming months will be particularly challenging for pension scheme members. A transfer could look very attractive in the current economic environment, but there will be many risks associated with this option. Some members will see their jobs come under pressure and the value of other assets such as their home fall relative to the value of their pension. The temptation to access pension savings may increase along with the risk of scams. It is very important that trustees and sponsors assess how vulnerable their members may now be and use this to tailor support. This can include scam protection, the channels they use to communicate with members and education on costs and options. For some a low cost employer destination vehicle may allow people to access flexibility they may soon need without incurring substantial pension charges”
To read the full survey view Member Outcomes Under Freedom and Choice.
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