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DB transfer values rose to record highs in August 2019, while the number of members requesting a transfer value continues to increase, according to XPS Transfer Watch.


XPS Pensions Group’s ‘Transfer Value Index’ jumped sharply to an all-time high of £258,200 on 21 August 2019; up from £247,400 at the end of July 2019.

The increase was said to have been “largely driven by a significant fall in gilt yields during August, partially offset by a small fall in inflation expectations”. 

XPS Pensions Group reported an increase in the number of transfer quotes being requested across some of its schemes, with some members choosing to pay for an updated calculation with transfer values at their peak. 

 

Mark Barlow, partner, XPS Pensions Group, said: “The impacts of recent volatile markets have seen transfer values increase steadily over the last two months, with an all time high in August.

“The continuing fall in gilt yields has pushed transfer values to new record highs, around 10% higher than they were this time last year.

“Although there is a lot of uncertainty around the future of the financial markets, an increase in transfer values will mean we are likely to see a lot of members investigating their options.
 
“Trustees and sponsors should ensure that members considering long term irreversible decisions are being provided with sufficient education and support to enable them to make the right decision for their circumstances and financial futures.

“We would also recommend schemes consider how the substantial changes in market conditions have affected the funding strategy and whether, in light of this, the transfer value basis remains appropriate.”

Flexible pensions cash may be a major contributor to the rise in savings deposits – rather than a rise in consumers saving more, new research has suggested.


Retirees withdrawing cash appeared to be acting with caution due to market volatility and were found to be using savings accounts as a “haven”, according to the latest statistics. 



HMRC revealed that both the volume and value of flexible payments from pensions has hit a new high.

Between April and June this year, £2.75bn was withdrawn from pensions flexibly, with 760,000 payments made.

Over the same quarter, statistics from the Bank of England noted £7.5bn was deposited into accounts that are accessible without penalty, which includes easy access accounts.

According to the latest research by Moneyfacts.co.uk, savers who have waited until now to open an account may have missed the boat on the most lucrative easy access rates, as they are now on the decline. 



 

Moneyfacts says retirees who want frequent access to use their savings pot as a source of income will “need to be mindful that the best easy access deals can apply withdrawal restrictions or require savers to open the account online”.

Savers will also find that the market average rate of 0.64% is less than the Bank of England base rate, so there are still many accounts to avoid due to poor returns.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Retirees may be withdrawing cash from their pensions for various reasons, either to plug a debt gap, boost disposable income or even to reinvest.

“There are signs that the cash could be going into easy access accounts, away from stock market volatility and within easy reach. In recent months, several providers have cut their easy access rates, plus some of the top deals include withdrawal restrictions.

“The downside to choosing an easy access account is the return, which is variable and may well drop should we see a base rate cut before the year is out.

“As the average easy access rate stands at just 0.64%, it’s clear to see that there are much worse rates out there for savers than can be found in the top rate tables.

“Indeed, the Flexible Saver from HSBC pays a disappointing 0.15% – 10 times less than the top rate in the market today on offer from Virgin Money, which pays a rate of 1.50% on its Double Take E-Saver.

“It is slightly worrying to find such a large rise to both the volume and value of pension cash withdrawals, hitting a new record since pension freedoms were introduced. If retirees take too much cash out of their pensions from the age of 55, they may end up with little provision for the future, which they are unlikely to be able to recoup. 

“Seeking independent financial advice, both when withdrawing cash and choosing a product in which to invest, is essential during a period of economic uncertainty.

“Taking out an easy access account may be an easy choice, but it doesn’t necessarily mean it’s the right one.” 

The rapid increase in DB transfer values has been a key factor in the rise in pension transfers and not greedy advisers seeking contingent charging fees, says platform and SIPP provider AJ Bell.
The Pensions Regulator has fined a firm £350,000 for failing to fully comply with its pension duties.

SIPPs and SSAS firm Talbot and Muir has warned that a number of SSAS arrangements face “significant costs and delays” on transfers to a more suitable vehicle, such as a SIPP.


SSAS arrangements continue to be popular with advisers and their clients but at times it becomes necessary to transfer to a SIPP, the firm says. 

This may be due to the sale of the sponsoring employer or other personal reasons. 

Talbot and Muir says many who decide to transfer their SSAS benefits but wish to retain certain assets such as property are faced with unjustified charges and administrative delays.

 

While SSAS’s are not regulated by the FCA the firm said it “seems unfair” clients are not protected by the FCA’s fair treatment of clients Outcome 6, whereby consumers do not face unreasonable post-sale barriers imposed by firms to change product or provider.
 
David Bonneywell, director, Talbot and Muir, said: “We are seeing a marked increase in the enquiries received from IFA’s in respect of SSAS schemes that wish to move to a SIPP. 

“One reason for the contact is that these schemes are facing very high costs to transfer and they are looking to see if there are ways to minimise this. 

“Current administrators appear to be unhelpful with regards to the transfer and are putting restrictive internal red tape in place, in particular when a property is involved. 
 
“A number of advisers are now recommending that the SSAS changes administrator and professional trustee, and then effects a transfer to a SIPP in a cost efficient and timely manner.”

Scottish Widows has been ordered to compensate a client after a rule change around overseas pension transfers led to him being hit by an unnecessary 25% per cent tax charge.
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