Defined benefit (DB) pension schemes that enable members to view their illustrative transfer value on a scheme website have consistently higher transfer take-up rates, analysis from LCP has revealed.

The analysis showed that quotation rates have been consistently lower, and take up rates have been consistently higher, for those schemes where members are able to view their illustrative transfer value on a Pulse-enabled website, which is LCP's pension administration service option, designed to enable members to view illustrative transfer values online.

In particular, the take-up rate for quotations in the 12 months to 30 June 2024 was 8 per cent where the scheme website provided illustrative transfer values, double the take-up rate of 4 per cent where this wasn’t the case.

Age discrepancies were also highlighted, as quotation rates continued to be highest for those aged 55 and over, as just under 5 per cent of members aged 55 and over requested a transfer quotation in the year to 31 December 2024, compared with only 2 per cent for members below age 50.

As a proportion of all quotations in the year which were then paid, 81 per cent were paid to members aged 55 and over and 9 per cent were paid to members between 50 and 54.

However, LCP acknowledged that the broader take-up rate for quotations issued in H1 2024 continued to remain low at 5 per cent, which is the joint lowest half yearly figure seen since it started its analysis 10 years ago.

This coincided with low average transfer values, as the average transfer value for quotations provided in H1 2024 was £149,000, which is the second lowest half yearly figure seen since LCP started this analysis in 2014.

More broadly, LCP also revealed that the average transfer value paid over the 12 months to 30 June 2024 was £147,000, which is the lowest annual figure since LCP started the analysis in 2014.

In addition to this, LCP noted that average take up amounts have fallen below average quotation amounts for the first time.

The analysis also looked at the potential impact from recent changes to inheritance tax, suggesting that the aggregated inheritance tax collected in respect of DB to DC transfers alone will exceed £35bn over the next two decades as the DB transfer generation gets older.

Commenting on the findings, LCP partner, Jim Little, said: “We expect the main reason behind the fall in take-up rates over the last two years is the sharp rise in gilt yields and the subsequent falls in transfer values .

"However, it’s also clear that while the wider economic context is important, schemes can also be proactive. Members seeing what a transfer value might look like can have a real impact on whether they end up following through with the transfer once a guaranteed quote has been provided.

"The combination of a prolonged period of high gilt yields and the changes to inheritance tax rules could keep transfer value activity low for a sustained period.”

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