The easing of the UK’s ‘lockdown’ could mean a steady rise in defined benefit (DB) transfers, as the ‘lockdown effect’ on the sector weakens, research from consultancy Lane Clark and Peacock (LCP) has found.
Analysis by LCP found a sharp decline in inquiries at LCP schemes following the nationwide lockdown at the end of March (see graph at the bottom of this article for full details).
According to LCP, more recent data from early May suggests a possibility that demand will grow over the coming months as financial pressures lead more over-55s to seek to access their pension funds.
Before lockdown the first quarter of 2020 had seen a relatively high volume of DB transfer inquiries, up 20% on the previous quarter. However, take-up rates were below historic levels during lockdown, and around three-quarters of transfer activity was carried out by the over-55s, according to the consultancy firm.
LCP postulated more scheme members could seek transfer quotes because the end of furloughing arrangements could lead to some scheme members losing their jobs and households running down savings balances could need alternative sourcing of short-term finance.
LCP partner Bart Huby said: "We have seen the beginnings of a ‘U' shape of activity around DB transfer inquiries so far this year. After a busy first quarter there was a clear ‘lockdown effect' as interest in potential transfers dropped sharply. But 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 the Pensions Regulator has warned trustees that they need to watch out for unusual or concerning patterns of transfer activity."
Graph showing DB transfer inquiries in accordance with the UK's lockdown. Source: LCP.
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