Interest in transfers out of defined benefit (DB) pension schemes has once again dipped during the latest lockdown, although a flood of insolvencies in 2021 could see a “gold rush” for DB transfers in the new year, analysis by LCP has found.

The firm revealed that, amongst the 80 schemes it administers, quotation requests had fallen to around 30 per week since the start of November, compared to around 37 per week in the early Autumn, and 50 per week prior to the first lockdown.

It emphasised that whilst the second lockdown has not led to the same slump in demand for transfer quotes as the first, when requests fall by half, it has still had a modest depressing effect on interest in transfers.

Despite this, the firm has predicted growth in interest in DB transfers in the new year, predicting that the end of government support mechanisms, such as the furlough scheme, will see corporate insolvencies rise significantly.

It argued that this could in turn place pressure on household budgets, leading more people aged 55 or over to consider accessing their pension benefits.

In particular, it argued that whilst there has been evidence of savers accessing defined contribution (DC) pots amid the pandemic, large-scale redundancies could lead people to consider the typically larger sums tied up in their DB pension instead.

Furthermore, it stated that there is already some evidence that in companies where a bankruptcy is “expected” there can be a flurry of interest in transferring in order to reduce the risk of entering the Pension Protection Fund.

Considering this potential increase in 2021, the firm has also emphasised the need for trustees to ensure that scheme members can access high quality impartial transfer advice.

LCP partner, Bart Huby, stated: “Interest in a potential pension transfer has been depressed during 2020, especially during the first and second lockdown periods.

“But 2021 may be very different and there is a real risk of a ‘gold rush’ of people looking to access their DB pensions.

“Emergency government measures to support businesses are expected to end in the first half of 2021 which could lead to a surge in unemployment and companies going bust.

“Older workers who lose their job may be very tempted to consider accessing their DB pension in order to meet vital household bills.

“This makes it all the more important that schemes do what they can to help members access affordable and high quality transfer advice so that members can make a decision that is right for them”.

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