Tastier carrots, bigger sticks – the insane world of DB transfers

It must bebemusing.  working on the XPS transfer value index. Each new iteration brings higher transfer values and lower prospects they’ll be realised.


The Transfer Value index represents the average transfer value a 64 year old could expect for giving up £10,000 pa of income for the rest of his/her life.


This chart shows the likelihood of trustees throwing a red flag at a transfer, making it exceedingly awkward for that 64 year old to get at his/her money using the pension freedoms.

The gardening


This chart shows how many carrots have been gardened (how many transfer values have been taken).

It shows that transfer activeity has been in consistent decline over most of the past three years with that decline levellling off in the past year.

This is based on XPS’ own experience of transfers on DB pensions it administers. They reckon that the current level of transfers equates to about 50,000 transfers a year.

Insanity indicators

The latest jump in the average Transfer Value is, according to XPS, down to an expectation of increased inflation. Try explaining that to the member contemplating the carrot.

If I was given that job, I’d try to explain it like this

Your DB pension is likely to pay you more income because inflation is going up, you are being given extra money to compensate you for money you would have got. Never mind you having no intention of buying an index-linked pension, this is a freebie.

The best that can be said about the valuation of CETVs is that they represent the benefit to scheme funding of the scheme ridding itself of its liabilities. The worst is that the member is being panicked into action when CETVs go up, thinking it may be “buy now while stocks last”.  For a member interested in the “cash equivalent”, the likelihood of an uptick in future inflation is an insane carrot.

The red-flag index comes on the heels of new transfer regulations from the Department for Work and Pensions (DWP), which came into force on 30 November, empowering trustees to block or pause pension transfers where they see potential scam activity.

Under the new regulation providers are required to raise ‘red’ or ‘amber flags’ when a transfer attempt to a suspicious scheme is made, with the red flag enabling trustees and scheme managers to completely block a transfer request, while an amber flag requires a member to have a scams guidance appointment from the Money and Pensions Service before the transfer can proceed.

The index indicates the percentage of requests to transfer blocked by XPS’ transfer police and suggests that at one stage nearly 80% of transfer requests are considered dodgy and even today, one in two requests need to be referred to the umpire. I don’t know how the XPS transfer police go about their assessments but all these fruitless transfer requests appear the most colossal waste of time and energy,

Transfer activity should be increasing as transfers go up but has infact been decreasing or staying constant. This suggests that most of the transfer activity was when transfers were low back in 2018. The sharp decrease in transfer values in March 2020 was down to the massive drop in markets at the outset of the pandemic and was reflceted in decreased transfers in the three months that followed. But as soon as the transfer values rebounded from June 2020 onwards, all the supressed activity was released and a couple of months of high activity followed.

This shows that transfer activity correlates to CETV values in extreme conditions, but the steady state of transfer activity since the blip at the outset of the pandemic, tells me that by and large, the size of the transfer does not generally prompt activity, carrots don’t work that well. Steve Webb used to call the acceleration of DB transfer values “sexy-cash”. It doesn’t look that sexy to me. Most money spent on ETVs looks to me a waste. More insanity.

More madness

The attempts to put corks in bottles by throwing red flags, referring members to Pension Wise and generally increasing awareness of the damage to long term planning that arises from swapping pensions for pots creates frustration that can lead to increased determination defining the characterisation of the “insistent customer”. The phrase “they would say that wouldn’t they?  is one of the favorites in the scammer’s toolkit.

The real madness of the pension transfer market is that there is one.

There are still advisers selling “de-risking” to corporate sponsors through identifying members of pension schemes who look ripe for transfer and enhacing transfers.

There is still a regulator who thinks this is Ok and there are still trustees who acceed to corporate pressure.

There are still advisers who are prepared to risk their livelihoods by reccomending transfers and professional indemnity insurers who are backing them.

None of this makes sense other than to the architects of pension freedoms, Norman Fowler, George Osborne and the financial services industry for whom the £80bn now sitting in wealth management accounts is the new economic miracle.

The cost of managing that wealth and the lack of financial acumen of many who own it, tells me we have frittered away  much of the real economic miracle of our funded defined benefit framework.

What should we think?

The competing claims on our DB pensions make for contradictory messaging. This mirrors what is going on between the Pension Regulator and the DWP who simultaneously want trustees to take more investment risk while reducing funding risk.

We are offering huge transfer values and blocking between 50 and 80% of the transfer requests. We have made it very hard for advisers to reccomend transfers but made the reward for scammers extroadinarily high.

Government seems able to control people’s behavior in the interests of public health but incapable of closing down the right to take a pension transfer.

Maybe it is time to re-think this whole expensive business, which seems to please no-one.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Tastier carrots, bigger sticks – the insane world of DB transfers

  1. Peter Tompkins says:

    You seem remarkably hostile to pension transfers. I know several very happy people for whom a fixed income in retirement was exactly what they did not need. For these the opportunity for 25% tax free to pay off debt and then keep the money invested to be accessed whenever they like is what they could only have dreamed of before pension freedoms. Of course there are those for whom it is not appropriate but it would be far worse if transfers were not permitted or approved advisers all disappeared.

  2. Pingback: CETVS – tasty or toxic carrrots? | AgeWage: Making your money work as hard as you do

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