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DB transfer values drop 4 per cent in September

Xafinity attributes the drop in DB transfer values to an increase in gilt yields

Average transfer values dropped over September, falling by 4 per cent from £240,000 at the start of the month to £230,000 by the end of the month.

According to the Xafinity Transfer Value Index, the difference between maximum and minimum readings over the month was £12,000, or around 5 per cent. 

Transfer values have been hovering around the £230,000 mark. In August transfer values increased by 3 per cent, rising from £230,000 at the start of the month to £237,000 at the end.

In June, transfer values decreased by 3.7 per cent, falling to £232,000 at the end of the month. During July transfer values dropped again to £230,000.

Source: Xafinity

Xafinity attributes the September fall to an increase in gilt yields. 

Xafinity defined benefit growth head Sankar Mahalingham says: “Historic CPI inflation was 2.9 per cent in the year to the end of August, up from 2.6 per cent a month earlier; this statistic was released on 12 September. This raised speculation in the markets that the Bank of England Monetary Policy Committee may start to raise the official bank rate sooner than previously thought.”

Mahalingham adds: “When expectations for increases in the official bank rate accelerate, it is normal to see gilt yields increase, all else equal, meaning the rise in yields over the month was not surprising.”

The index tracks the transfer value that would be provided by an example DB scheme to a member aged 64 who is currently entitled to a pension of £10,000 each year starting at age 65 (increasing each year in line with inflation).

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