Defined benefit pension schemes are offloading more than £10bn a year in liabilities due to members transferring out their pension pots, analysis from JLT Employee Benefits has revealed.

JLT reported: “The bigger news, however, is the huge volume of transfers out from DB schemes by individual members.

As an example, JLT’s administration teams are now paying out £100m per month in transfer values, up from £10m per month just four years ago.

“If we extrapolate this across the industry, then it is clear that individual member transfers are now removing more than £10 billion a year of DB liability, therefore easily rivalling bulk annuity volumes.”

Following the introduction of pension freedoms in 2015, the volume of DB pension transfers has been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution (DC) schemes in order to access their cash.

Figures published by Mercer in April showed as much as £50bn has been pulled from final salary pension schemes in the past two years.

Meanwhile HM Revenue & Customs data showed more than £14bn has been unlocked from DC pensions since pension freedoms came into effect.

The report added: “Faced with a transfer value that is between 20 and 40 times the size of their pension (bloated due to the current ultra-low yield environment), it seems that many individual members over the age of 55 wish to transfer to DC so that they can access a series of cash-lump-sums and draw-downs rather than a traditional ‘for life’ DB annuity.”

Fintech company Origo revealed that almost £31bn of pensions money was moved through its service Options Transfers in 2017, carrying out more than half a million transfers in the year.

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Blog originally published by FT Adviser.

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