Defined benefit (DB) pension transfer activity and values have made a "stable start" to the year, although many schemes are preparing for a potential "influx" in members wanting to transfer their pension to address cost-of-living challenges, analysis from XPS Pension Group has suggested.

XPS's Transfer Value Index revealed that pension transfer values rose by around 2 per cent during January 2023, ending the month at £171,000.

The slight increase in transfer values was primarily attributed to a small fall in gilt yields and a slight rise in long term inflationary expectations during January, both of which are key assumptions in determining the value of a DB pension transfer value.

XPS’s Transfer Watch also showed that transfer activity fell slightly during January, recording an annualised rate of 39 members per 100,000 transferring out of the current scheme to an alternative arrangement, down from 44 in December.

However, although XPS noted that this rate is consistent with the index over most of 2022, aside from the large spike in activity in November, it warned that many schemes are expecting an influx in members wanting to transfer their pensions to address the cost-of-living crisis.

“Following the significant fall in transfer values over the past year, it’s perhaps unsurprising we are seeing more stability and fewer people transferring their pension," XPS Pensions Group head of member options, Mark Barlow, explained.

“However, many schemes are continuing to brace for an influx of members wanting to transfer their pension to address the cost-of-living crisis and are implementing additional support and protection to ensure members make the right decision for their circumstances.”

This additional support is perhaps timely, as the index also revealed that 93 per cent of cases reviewed by the XPS Scam Protection Service in January raised at least one scam warning flag.

This marked the third consecutive month the index has remained at this level and the eighth month in a row where it’s been above 90 per cent, although it remains lower than the 97 per cent high recorded in September 2022.

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