Pension transfer activity slumps to six-year low amid Covid-19 crisis

Rather than a surge in interest in DB transfers, LCP has found that requests for transfer values – which were already on a downward trend – have "fallen off a cliff in recent weeks".

LCP's figures show that in January and February, a typical week saw 40-50 scheme members request a transfer value, but that number has been falling steadily since the start of March with volumes now down by more than three quarters.

The firm says that the major disruptions to daily life could mean that people have more pressing financial matters or could attach more weight to the relative certainty of a DB pension compared with a DC pension, particularly in light of recent stock market slumps.

Additionally, a significant number of DB schemes have now decided to put a temporary hold on providing transfer quotations to allow market volatility to settle down and give time to review their transfer value calculation bases. This is likely to reduce overall transfer activity further for a period of time.

However, LCP says there are a few schemes where, in stark contrast, the pace of requests has held up (and for some even increased a little). These appear to be associated with situations where there may be particular concern amongst members about the financial strength of the employer in this crisis.

Bart Huby, partner at LCP, commented: “Regulators are understandably concerned about the risk of people under financial pressure transferring money out of their pensions and being exposed to scams. But our data suggests that in the short term there has been a sharp drop in the number of people asking for information about transferring out of their salary-related company pension.

"This could reflect nervousness about market conditions or simply the fact that people have other things to focus on at the moment. What is not yet clear is whether transfer volumes will bounce back later in the year as schemes relax temporary restrictions on processing transfers and more members decide that they need to access their pensions to meet financial pressures”.