Transfer value experience – Q4 2021

We have analysed defined benefit (DB) cash equivalent transfer values (CETVs) over the twelve months to 31 December 2021. 

Transfer related activity remains remarkably steady, in contrast to 2020 and early 2021, where activity was severely disrupted by the national lockdowns.

The stability is also slightly surprising, given the well-publicised ban on contingent charging from October 2020 and the reduction in the number of firms now prepared to give DB transfer advice.

One area where there was a return to volatility over the quarter was transfer value amounts, which was driven by fluctuations in gilt yields over the period. This volatility in market conditions may continue into 2022, both with the uncertainty related to Russia’s invasion of Ukraine and inflation currently at its highest level for a decade.

"With expectations of interest rate rises in 2022, members may see volatility in their transfer values as markets respond to any changes - a significant rise in long-term interest rate expectations could reduce transfer values significantly."

It therefore remains crucial for trustees and sponsors to review what support they provide to their members. In particular, trustees should ensure that their administrator has implemented new procedures to assess whether they should refuse a transfer value that is at risk of being a scam and that they have in place sensible procedures to make the judgment calls necessary when a case is not a clear cut 'red flag'. 

For more information, download our briefing note today.