Standard Life is urging advisers to manage client expectations that defined benefit transfer values do not increase and decrease in line with equity markets.
Standard Life financial planning propositions head Alastair Black says helping clients understand how transfer values behave is increasing in importance as DB transfers become a more mainstream part of advisers’s businesses.
Technology firm Origo said in January it has facilitated £25bn worth of pensions transfers in 2016, which represented a 19 per cent rise on the previous year.
At the same time, DB transfer values have increased with Black citing examples of some going up by as much as 80 percent.
Black says: “If you look at what has happened to transfer values in the past three years they have gone up quite dramatically. What we do know is that DB transfers will largely follow gilt yields. Given that they have changed so much in past years DB transfers should have gone up by something comparable.”
However, he explains that transfer values have now started to fall slightly as gilt yields have started to rise.
He says: “Where it is sensible for the client to move, that can take some time. It is helping to set the client’s expectations that transfer values will go up and down but to set their expectations that they will not necessarily go up and down in line with equity markets.”