Pension Golden Goodbyes Fall For Scheme Leavers

Pension transfer values fell 3.7% to an average £232,000 last month following the trend of fluctuation in the amount employers are paying workers moving out of workplace final salary schemes.

Over recent months, the average transfer value has spiked at around £245,000 before falling to the current low.

According to pension consultancy Xafinity, which tracks the movements of transfer values, the payments have fluctuated by 5.2% or £13,000 in the second quarter of this year.

The firm’s Sankar Mahalingham said: “In June 2017 we have seen a continuation of the volatility of transfer values that we saw in April and May, with changes in gilt yields being the main driver.

“The volatility we have seen over the second quarter of 2017 is a result of a number of issues such as the uncertainty caused by the general election and commencement of Brexit negotiations.

Huge pay-offs for leavers

“These are unprecedented times, it remains to be seen whether we will enter a period of relative calm again over the summer months, or if as is perhaps more likely this volatility will continue into the foreseeable future.”

FTSE350 companies have offered huge pay-offs to encourage workers to leave final-salary pension schemes to try and plug underfunding deficits which stand at around £52 billion.

The figure is the difference between scheme assets and the amount they are liable to pay retirees.

Some firms are reportedly offering sums of between 20 and 50 times predicted guaranteed retirement incomes to workers willing to take the cash and leave the schemes.

Proposals to change pension transfer advice

The move has prompted regulators to look at changing pension transfer rules.

The Financial Conduct Authority has taken the view that transferring out of a pension that guarantees a retirement income and offers other guaranteed benefits.

The FCA is proposing that transfers might be worthwhile if the retirement saver wants to take advantage of pension freedoms to access cash in their funds.

Most workplace pensions do not offer flexible access and tie-up funds until a member is aged 60 or 65 years old.

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