Defined benefit (DB) pension transfer activity fell to a five-year low at the end of 2023, research from XPS Pensions Group has revealed.

The consultancy’s Transfer Activity Index showed a steady downward trend across 2023, with an annualised rate of 18 members in every 1,000 transferring their benefits to alternative arrangements in December 2023, marking a new index low.

This was despite an end-of-year bounce in transfer values from October's record low, as XPS's Transfer Value Index showed that the quoted value of a typical pension transfer increased by over 5 per cent in December, and by 6.5 per cent over the last quarter of 2023 to £164,000.

XPS attributed this rise primarily to the fall in gilt yields over the latter months of the year, pointing out that December marked the first time the index has seen two consecutive month-end increases since late 2021.

In addition to this, XPS’s annual Member Outcomes Survey found that, overall, transferring out of a DB scheme remained a more popular option amongst the over 55s despite falling transfer values.

There was also a continued increase in the rate of smaller pension pots being transferred, with 40 per cent of transfer values being under £100,000 and one in six falling under the £30,000 threshold that means members are required to take independent financial advice.

Commenting on the findings, XPS head of member options, Mark Barlow, stated: “Despite transfer volumes hitting record lows, our research highlights that transferring as part of wider retirement planning remains a popular option for those over age 55.

“Given that, it’s important that schemes provide support to members to help them make appropriate decisions for their circumstances.

“We are particularly concerned that a rise in smaller transfer values may put more of the most vulnerable members at risk of being scammed, as they are not required to take financial advice. Schemes should consider how they can best support these members as they begin to access their pension pots.”

Indeed, although no change was seen in the XPS Scam Flag Index, with 90 per cent of cases reviewed by the service in December raising at least one scam warning flag, the group stressed that the index has remained high throughout 2023.

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