Defined benefit transfer values hit a record high last month despite the number of transfers falling for the second month in a row, according to XPS Pensions.
XPS Pensions Group’s Transfer Value Index saw transfer values hit £264,300 on August 24, before falling back to hit £259,000 at the end of the month.
The hike was due to increased inflation expectations and falling yields on government bonds, both of which generally increase transfer values, the firm said.
Inflation jumped to 3.2 per cent in the 12 months to August 2021, up from 2 per cent in July, making it the largest ever recorded increase.
However, DB pension transfer activity fell for the second month in a row with 62 members out of every 10,000 having transferred their pension.
Mark Barlow, partner at XPS Pensions Group, said: “Transfer values remain high due to low gilt yields and inflation expectations creeping up.
“The index reaching another record high demonstrates how tempting a transfer value can be which, in turn, highlights the importance of providing appropriate support for members alongside it.”
In addition, the XPS Red Flag Index fell below 50 per cent for the first time in more than 12 months, with 47 per cent of pension transfers showing at least one warning sign of a potential scam or poor member outcomes.
Helen Cavanagh, client lead at the member engagement hub at XPS Pensions Group, said: “It is encouraging to see another month in which the Scams Red Flag Index has fallen, although flags are still being identified in almost half of cases.
“Fee-related concerns remain the most prominent warning area; redress guidance is a reminder that members can fall foul of unjustified fees both at the point of their initial transfer and from the charges levied from that point onwards.”
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