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DB transfer values end 2018 with heightened volatility

Pension transfer values experienced a turbulent end to last year according to the consultancy XPS Pensions Group.

During December 2018 the group’s transfer value index was the most volatile it has been since September 2017.

The index tracks the transfer value that would be provided by an example defined benefit pension scheme to a 64-year-old client entitled to £10,000 a year pension starting at age 65.

Although the index remained relatively stable throughout 2018, a change in gilt yields made the end of the year more bumpy.

Over December the difference between the maximum and minimum readings was £14,000, around 6 per cent.

The index increased 2.3 per cent over the month but ended the year at £235,000, little changed from the figure of £236,000 at the end of 2017.

These figures were also relatively unchanged compared to the index at the end of 2016, which was £234,000.

The difference between maximum and minimum readings of the index over 2018 was £17,000, around 7 per cent.

XPS Pensions Group head of DB growth Sankar Mahalingham says: “Transfer values jumped sharply in early December before gradually falling again towards the end of the month.

“These movements were primarily driven by changes in gilt yields, which dropped by almost 0.5 per cent before recovering towards the end of the month.  Inflation was also volatile, but less so, and ended slightly down over the month.

“Despite being relatively stable over the course of the year, transfer values suffered a volatile December. This volatility may continue through the first quarter of 2019 as economic uncertainty around Brexit persists.”



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