Outcomes have improved for scheme members choosing to transfer, according to research by XPS Pensions.
The firm's third Member Outcomes Survey - which considers the outcomes for 2,200 members who choose to transfer from the schemes that XPS administers - revealed a potential modest improvement in outcomes for pension scheme members choosing to transfer, when compared to last year.
The average transfer value was £290,000, up 5% from last year, with the majority (98%) of members transferring to a self-invested personal pension.
The firm noted: "We have seen a welcome shift towards members choosing less expensive vehicles for their transfers, but costs still remain high. This shift coincides with many more trustees and employers taking steps to improve outcomes for their members."
The survey also revealed 30% of schemes that XPS works with have taken action to improve outcomes for their members, and revealed many of the schemes it advises have implemented initiatives to improve outcomes.
It also noted that the typical transferring member is healthy, financially secure and more comfortable using online technology than the average defined benefit (DB) pension scheme member.
Additionally, the average value of pension scheme transfers has increased following the Covid-19 outbreak, while transfer activity has also risen since April.
Despite the improvement in this year's survey, XPS is "particularly concerned" about the outcomes for members in the near future, and the survey predicted increasing member vulnerability in pension transfer activity over the next 12 months.
XPS also said it is "important that employers and trustees continue to implement solutions to protect their members and improve their outcomes in retirement".
Head of member options Helen Ross said: "It is encouraging to see some signs that outcomes are improving in light of the actions many pension schemes are taking to support their members. Perhaps at odds with what may be expected, we also found that the typical profile of a member leaving their DB pension scheme is healthy, financially secure and familiar with online technology.
"But most of this was before the impact of Covid-19. Financial pressures could see pension transfers become more tempting to more members and particularly those that are less financially secure. The support and protection pension schemes offer will become critical. Understanding their membership in more detail, will enable schemes to tailor their support, particularly around communications and scam protection to best suit their specific member profiles."
Partner Mark Barlow added: "The coming months will be particularly challenging for pension scheme members. A transfer could look very attractive in the current economic environment, but there will be many risks associated with this option. Some members will see their jobs come under pressure and the value of other assets such as their home fall relative to the value of their pension.
"The temptation to access pension savings may increase along with the risk of scams. It is very important that trustees and sponsors assess how vulnerable their members may now be and use this to tailor support. This can include scam protection, the channels they use to communicate with members and education on costs and options. For some, a low cost employer destination vehicle may allow people to access flexibility they may soon need without incurring substantial pension charges."
Millions of people are saving for a pension for the first time thanks to AE, but the Covid-19 crisis has posed a communications challenge. James Phillips looks at how to get the long-term nature of pensions across to this new generation of savers.
Professional Pensions spoke to Capita Pensions Consulting managing director Stuart Heatley as part of an exclusive series of interviews with the leaders of some of the UK’s leading pension consulting firms. This is what he had to say…
The Pensions and Lifetime Savings Association (PLSA) says it isn’t planning to return to live events ‘as we knew them’ until at least 2022.
There were 7% less deaths registered in week 26 of 2020 than if death rates had been the same as week 26 in 2019, according to the Continuous Mortality Investigation (CMI).
Professional Pensions spoke to Buck's UK managing director David Piltz as part of an exclusive series of interviews with the leaders of some of the UK’s leading pension consulting firms. This is what he had to say…