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DB transfer values ride out turbulent February

Pension transfer values remained unchanged in February, despite an initial jump.

There was a broad increase throughout the start of the month, but a sharp drop later in February left the XPS Pensions Group Transfer Value Index unchanged over the period.

The index, which uses the example of a defined benefit scheme to a 64-year-old member who is currently entitled to a £10,000 annual pension starting at age 65 and increasing each year line with inflation, came in at £235,000 at the end of February, identical to the value at the end of January.

Over the month, there was a £5,100 variation in maximum and minimum readings, with the highest recorded value around £240,000 – a 2.1 per cent variation over the month.

XPS head of DB growth Sankar Mahalingham says: “A combination of increased inflation expectations and reduced gilt yields were the reason for the rise in the index initially in February, with increased gilt yields at the end of the month bringing the index back in line with the start of month position.

“The volatility observed in February was similar to January, but lower than that experienced at the end of 2018.  During March 2019, there may be more volatility in market conditions as the negotiations regarding Britain’s exit from the EU continue with the 29 March deadline approaching.”

The index remains well above the £210,000 value observed in mid 2016, but is down from a spike to around £245,000 in December last year.

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