XPS Pensions Group’s Transfer Value Index increased steadily throughout May, finishing the month at £258,600, up from £249,300 at the end of April. This increase was a result of a rise in long-term inflation expectations during the month. The index is now only marginally lower than the record value of £260,422 observed on 3 September 2019.
XPS Pensions Group’s Transfer Activity Index rebounded from the record low of 0.58% set in April, with the number of completed transfers increasing to an annual equivalent of 0.65% of eligible members. This represents just over 6 in every 1,000 eligible members transferring each year.
In market news, the Financial Conduct Authority (FCA) has confirmed that it will ban contingent charging for pensions transfer advice from 1 October 2020, in all but a small number of circumstances. The ban has been designed to address the FCA’s long-standing concerns about conflicts of interest arising from advice fees that are dependent on transfers proceeding.
Mark Barlow, Partner, XPS Pensions Group commented: “Transfer values rose during May as we saw long-term inflation expectations return to pre-lockdown levels. We also saw a small uptick in transfer activity during May which may be a result of those schemes who initially paused transfers restarting quotations. At XPS, around 25% of schemes we work with paused transfers initially but our most recent survey in mid-May showed only 6% continue to suspend quotations.
“The ban on contingent charging has been expected for some time. We are generally supportive of this change, as it will remove a potential conflict of interests from advisors. However, it could lead to worse outcomes in the short-term as members find it difficult to take advice, either because they are unwilling to pay upfront advice fees or due to a shortage of capacity as firms withdraw from the market.”
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