High pension transfer values are driving many more people, including expats living abroad, to take control of their pensions and transfer to a SIPP or QROPS.
Recent research by UK consultants Barnett Waddingham showed that pension values in 2017 increased by a median of 56%. Indeed, some pension funds saw a hike of more than 200 per cent in the amounts paid in transfers.
Since the introduction of pension freedoms in 2015, the number of people transferring out of their defined benefit (DB) pensions has been soaring, as savers seek to take advantage of sky-high transfer values and to move their pots into defined contribution (DC) schemes in order to access their cash.
According to the Office for National Statistics, funds transferred out of pension schemes almost tripled to a record £34.2bn in 2017 and average final salary transfer values stood at £235,000 at the end of March.
The research added there is a strong focus on transferring risk from the sponsoring employer, which is not surprising as 69 per cent of schemes have a deficit in their company accounts.
Many employers’ schemes are seeking ways of mitigating risk and many continue to close future accrual of benefits. However, this still leaves many employers with large legacy pension liabilities to manage and ‘Defined Benefit’ transfer is often a very cost-efficient way of discharging their liability.
The trend for high transfer valuations is set to continue through 2018, however, it’s uncertain how sustainable the current transfer values are. It may be worth acting now while they last.
Taking control of your pension
With the the current high transfer values on offer this may be the ideal time for you to take control of your pension and switch to a SIPP or QROPS – depending on which is appropriate for you.