The number of people asking for defined benefit (DB) pension transfer quotations and following through with them has fallen to its lowest level since 2015, research from LCP has revealed.

According to LCP, the analysis revealed a "clear pattern" in the declining number of quotations issued and take-up of these quotes by scheme members, revealing that the value of transfer quotations issued in Q3 2022 was the lowest total since Q1 2015.

Indeed, the research revealed an average quotation size in Q3 2022 of £252,000, down 24 per cent from £330,000 in Q2 2022, and marking the lowest figure for over seven years.

In addition to this, only 15 per cent of transfers quoted in Q1 2022 were taken-up, the second lowest rate in seven years, according to LCP.

The top 25 per cent of the market in Q1 2022 saw the biggest fall in take-up rates in the research, dropping from 50 per cent in Q4 2021 to 25 per cent in Q1 2022.

There was also a fall in the average transfer value paid in Q1 2022, the latest quarter with complete payment data, as the research showed that the average transfer value paid was £441,000, down 29 per cent from £617,000 in the previous quarter.

LCP also predicted a further fall in take-up rates going forward, pointing out that average transfer values quoted in the final quarter of this year are expected to fall further as a result of continuing high gilt yields.

Indeed, although the firm suggested that there are a number of factors behind this slow down, including new anti-scam rules introduced last year and members struggling to find a financial adviser who is able to provide DB transfer advice, it argued that the main reason behind the “slow death of DB transfers” lies in the sharp rise in government bond yields over the past few months.

LCP explained that this volatility led to a collapse in the values people are being offered, as a higher gilt yield environment means the amount of money a DB pension scheme needs to hold to pay a member’s pension in the future has fallen, and has been reflected in lower transfer values.

Commenting on the findings, LCP partner, Jim Little stated: “We are witnessing the slow death of DB transfers. In the last three months, interest in transfers in terms of people asking for quotes has been at its lowest level since the introduction of pension freedoms in 2015.

“We are also seeing very low take-up rates, with just one in six quotes taken up in the first quarter of this year, the second lowest figure since 2015. The biggest single reason is likely to be the collapse in transfer values being offered, caused primarily by changes in interest rates in the last year.

“But there was already a downward trend as anti-scam legislation has slowed up the DB transfer process and as members often find it hard to source a financial adviser, with many advisers having left the market in recent years”.

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