May, like April, proved a volatile month for defined benefit (DB) pension transfers, with transfer values being affected by a variation in gilt yields, the latest Xafinity Transfer Value Index has shown.
According to the index, transfer values saw a 3.5% variation during the month of May, equal to a value of £9,000. Overall, values increased 1.7% in May, from £237,000 to £241,000.
Gilt yields meanwhile, which tend to sit at -2%, varied between -1.6% and -1.9% during the month, Xafinity said.
Head of pension investment Ben Gold said variation in gilt yields was likely caused by the uncertainty that comes with Friday’s election result, which brings with it uncertainty over economic policy.
Xafinity’s index tracks the transfer value that would be provided by an example 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.
Volatility to continue
The transfer value variation throughout May was similar to that of April, when transfer values were rocked by the snap election. Like May, April transfer values saw a 3.5% variation across the month.
The volatility followed a period of calm for transfer values over the first quarter of 2017.
Values had stayed flat in January but began to rise again in February, when they reached £237,000. However, in March values fell back by about 1%, to £235,000.
Xafinity director Sankar Mahalingham said: “In May 2017 we have seen a continuation in the volatility of transfer values experienced in April; this month it has been caused mainly by variation in gilt yields.
“Depending on the outcome of the General Election, and with negotiations for Britain to exit the EU about to start in earnest, we expect the volatility will continue for some time yet. Members continue to investigate this option while transfer values remain at high levels.”
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