The coronavirus pandemic led to March being the most volatile month on record for defined benefit (DB) pension transfer values, according to XPS Pensions Group.
XPS’s transfer value index (TVI) fell from £249,700 at the end of February to £242,600 at the end of March, and in the middle of the month, transfer values fell 11% to a low of £222,800 – a level not seen since July 2016.
According to XPS, the dramatic movements were largely due to fluctuations in gilt yields as the Covid-19 outbreak took hold during March.
XPS’s index tracks the transfer value that would be provided by a hypothetical DB scheme to a member aged 64 who is entitled to a pension of £10,000 each year, starting at age 65. It increases each year in line with inflation.
Elsewhere, the group’s transfer index, which monitors how market developments have affected transfer values for an example member, as well as how many members are choosing to transfer away from schemes that XPS administers, recorded a fall in the number of transfers completed in March to an annual equivalent of 0.76% of eligible members, down from 0.89% in February.
According to XPS, though the transfer rate is not far off the average levels observed in the last year, it is the lowest recorded by the transfer index since its inception in 2018.
XPS Pensions Group partner Mark Barlow said: “The unprecedented Covid-19 crisis has sent shockwaves through the financial markets, causing the greatest fluctuations we have ever seen in the TVI.
“With such volatile markets, it is perhaps unsurprising that transfer activity has also fallen, to the lowest level since the inception of the index, as members shy away from big financial decisions in the current climate.”