Defined benefit (DB) transfer request volumes are on the road to recovery after having declined sharply amid the coronavirus crisis, according to LCP.

The firm’s quarterly analysis of the schemes it administers found that volumes bottomed out in the week commencing 6 April before beginning to recover, though requests still remain well below pre-lockdown levels.

Having generally hovered at around 50 requests per week before social distancing rules came into effect, requests are hovering around the 25 per week mark after dropping into the low teens in the week commencing 6 April.

Around a quarter of schemes analysed had suspended transfer quotations following the lockdown, in line with easements from The Pensions Regulator (TPR), though several of these have now resumed issuing quotations.

Prior to lockdown, the first quarter of 2020 had seen a relatively high volume of DB transfer inquiries, up 20 per cent on the previous quarter and back to the levels of a year earlier.

LCP noted that the latest data on take up of transfers, which reflected the proportion of those receiving quotations six months ago who then went on to transfer, showed that ‘take-up rates’ were well below historic levels.

Actual transfer activity was increasingly concentrated on the over-55s, with around three quarters of all amounts transferred being for this age group.

The firm pointed out that transfer quote requests could climb again in the near future, especially if furloughing arrangements end with some scheme members losing their jobs, or if households’ savings become so depleted that they need alternative sources of short-term finance.

LCP partner, Bart Huby, said: “In more recent weeks there are signs of a recovery in interest in transfers. It is possible that we may see a much higher level of inquiries later in the year as household budgets come under greater pressure, and TPR has warned trustees that they need to watch out for unusual or concerning patterns of transfer activity.”

LCP partner, Clive Harrison, commented: “A key challenge will be to ensure that scheme members can access balanced and affordable advice, especially if they are motivated by short-term financial pressures. It is also important to ensure members are aware of all their pension options as most schemes allow early retirement from age 55.

“We’re likely to see more trustees looking to improve communications and appoint an IFA firm to provide their members with the support they need.”

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