Could we see record highs for pension transfer values?

Could we see record highs for pension transfer values?

The 10-year GILT yield has hit an all-time low! 

What is a Gilt?

Gilts are British Government Bonds issued by HM Treasury. They are how the UK government fund their borrowing. They are traded on the open market which means their price and yield can go down as well as up.

What has this got to do with my pension?

Gilt yields underpin a key element of the transfer values it offers to members. Therefore, defined benefit pension transfer values are reliant on gilts because they indicate the current risk-free rate of return. Typically, as gilt yields go down, cash equivalent transfer values (CETVs) go up.

The current yield, as shown by the below chart, is at an all-time low. Again, this is hugely influential to people considering transferring out of their Final Salary Pensions.

UK 10 Year Gilt Yield – Over the last 15 years

Of course, there are other factors at play in deciding Pension Transfer Values. Final Salary Pensions are complex, and it is important to fully understand how they are calculated. For a more detailed explanation you can read our article here.

In Brief, a Final Salary Pension Transfer Value is the amount offered in exchange for you giving up your entitlement to an adjusted for inflation and guaranteed-for-life pension. You’ll be offered a lump sum, which should represent a fair lump sum amount for the benefits you are giving up.

Your transfer value is decided by your pension scheme administrators. Each scheme may have their own calculation, but generally they will consider factors such as:

  • Your Age
  • Scheme Retirement Age
  • Cost of Living
  • Life Expectancy of the average member
  • Scheme investment costs & returns

There has never been a better time to look into your defined benefit transfer!

Retrieving a transfer quote and obtaining an initial opinion on whether or not it is worth considering a transfer is completely free and carries no obligation. It also takes 2 minutes to fill out an information request form and we do the rest of the leg work. It really is a fantastic time to at least look into this and find out more about the options that are available to you.

If you left a pension in the UK, get in touch with us today.

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George Stainton

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