Companies handing piles of cash to employees willing to transfer out of their gold-plated final salary schemes have helped push the number of people switching out of direct benefit pensions by 166%, according to new research.
The figure has almost trebled in a year – from 44 in the first quarter of 2016 to 117 in the same period this year.
More retirement savers are also investigating making the switch from a final salary pension to a SIPP or personal pension, says financial consultancy Xafinity.
In the first three months of 2017, 958 inquiries were made about pension switching, up 70% from 562 for the same period last year.
The average pension transfer value for Q! 2017 was £235,000 – 11% more than in March 2016.
Trend could continue
Xafinity’s head of proposition development Paul Darlow explained if high transfer values were maintained, the trend could continue.
“Until October last year, the number of direct benefit transfers completed was relatively stable month-on-month,” he said. “However, since October, the amount of transfer activity has increased significantly.
“The impact of financial conditions over the last year has been significant and this has been a material consideration for pension scheme members, with an increasing number requesting partial transfers as well as full transfers.
“While the flexibility around partial transfers would be a good thing, there are still barriers to overcome, with the main issue for many schemes being the administration complexity.”
Some FTSE firms are reportedly offering pension members huge sums of money to transfer out of their schemes.
Figures as high as 50 times the project annual pension have been quoted – making the transfer pot for an expected £20,000 a year pension worth £1 million.
Offers of between 20 and 40 times projected pension values are common.
“This increase in the number of people opting to transfer their direct benefit pensions has put regulation of this market firmly in the spotlight,” said Darlow.
“With two documents on direct benefit transfers published by the Financial Conduct Authority already this year and the possibility of a thematic review impending, it is clear 2017 is going to be another interesting year for direct benefit schemes.”