Members transferring in the year to 31 March 2021 faced average total fees of 1.9% p.a., a 10% increase on the previous year and the highest level since XPS’s survey began four years ago. These fees include charges associated with the financial products that members transfer into, as well as for ongoing financial advice.
The increase in fees came as average transfer values rose considerably. Fewer members transferred over the year to 31 March 2021, down 23% on the previous year. However, the average transfer value paid increased by 29% to £375,000, significantly more than the average UK house price. This rise was driven by the members with the largest values choosing to transfer their pension.
In the context of higher average transfer values, the increase in fees may also be driven by members choosing more sophisticated options. The survey revealed that 99% of members transferred to a Self-Invested Personal Pension (SIPP). These range in sophistication and complexity, with fees ranging from as low as 0.7% pa to over 3.0% pa (including ongoing financial advice). Some vehicles that can also be lower cost, such as workplace pension schemes or master trusts, are not routinely considered by members. If schemes combine access to financial advice and lower cost options, this could help the average member’s funds last a full ten years longer in retirement.
The gap between transfer values paid to male and female members reduced from 50% to 21% in the year to March 2021, with the average transfer value for men sitting at £394,000 and women at £326,000.
Mark Barlow, Head of Member Options, commented: “The slowdown in transfer activity over the last 12 months is unsurprising since most of the year was spent in lockdown. Interestingly, it’s been those with the largest values who have continued to transfer. This, together with the reduction in choice for members transferring, may explain why average charges have increased by 10% since last year.
“We’ve been encouraged to see trustees and employers step up support, with 50% of members of schemes we work with now having access to enhanced support, up from 31% last year. However, the pent-up demand from fewer transfers and retirements means there’s likely to be an increase in members considering their options soon. As a result, it’s as important as ever that trustees and employers take steps to improve the support they provide and ensure the best outcome possible for their members.”
|
