Defined benefit (DB) pension transfer values fell by 4 per cent over the month of December, XPS Pension Group’s Transfer Value Index has found, revealing that transfer values fell a total of 36 per cent over the year as a result of significant rises in gilt yields.

The group noted that transfer values had fallen “precipitously” over 2022 after investor concerns over UK debt drove gilt yields higher.

XPS explained that UK gilt yields had risen sharply throughout 2022, reflecting investors’ concerns about the impact of inflation on the country’s economy and the prospect of a widely predicted recession in 2023, pointing out that gilt yields are a “major factor” in determining the value of a DB pension upon transfer.

In line with the fall in transfer values, XPS found that demand for transfers also contracted in 2022 as its Transfer Activity Index showed that average transfer activity across 2022 was 44 members per 100,000, down from the 62 per 100,000 recorded across 2021.

XPS confirmed that the numbers for December 2022 were also in line with annual averages, following a spike in November, when DB pension transfer activity reached its highest level since July 2020.

Elsewhere in the update, XPS revealed that 2022 had seen a "significant increase" in the number of transfers being flagged as showing potential signs of a scam, with 87 per cent of cases in 2022 showing scam warning flags, up from 52 per cent the preceding year.

XPS said that this increase was largely down to new legislation introduced in late 2021, which, amongst other things, required that any transfer going into a vehicle with overseas investments raises a scam warning flag.

During December 2022, at least one potential scam warning sign was identified in 93 per cent of the cases reviewed.

XPS Pensions Group head of member options, Mark Barlow, commented: “Transfer values have plummeted over the last year, which will be a cause of concern for many members.

“It makes access to high quality support and advice more important than ever before members make potentially irreversible decisions that could impact their retirement.

“However, it’s reassuring that, as yet, we have not seen a sustained trend of more members transferring due to cost-of-living pressures.”

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