Pension firms report increased demand for DB transfer quotes

New pension freedoms have led tens of thousands of final salary pension scheme members to consider cashing in their "gold-plated" pensions, FT research has revealed.

Figures provided by major pension scheme administrators show requests for "transfer values" at some companies have almost doubled.

The freedoms, which came into force last month, gave individuals with defined contribution (DC) pensions new flexibility to cash in their savings from age 55. Members of defined benefit (DB) schemes must first transfer their benefits to a DC scheme if they wish to take advantage of the new cash flexibility.

The government and regulator had estimated that the freedoms could lead to a further 9,000-15,000 transfers annually, on top of the 20,000 or so that ordinarily take place each year, according to the Office of National Statistics.

But Mercer, which administers pensions for about one million DB scheme members, said it had seen a 60 per cent rise in transfer valuation requests in recent months. It has received 22,000 such requests since February last year.

"We've seen a large increase during the past few months," said Matthew Demwell, partner and UK head of member options at Mercer.

"We suspect that the government advertising and publicity around its Pension Wise guidance service, and the pension announcements made in the 2015 Budget have spurred people to investigate what their DB pension scheme benefits are actually worth."

Barnett Waddingham, a pension consulting firm, said transfer quote requests were at record levels. "In the 13 months since the new flexibilities were first mentioned in the 2014 Budget we have received 1,250 transfer value requests - a threefold increase," said Danny Wilding, partner with Barnett Waddingham.

"It is still too early to say how many of the requests will actually result in a transfer."

Hymans Robertson said a rush on transfer requests had started in January this year, peaking in March. "In the last quarter of 2014 we received 450 requests for a transfer value. In the first quarter of this year - in the run-up to the reforms - we have seen 750 requests for a valuation," said Calum Cooper, partner with Hymans Robertson.

"We are seeing volumes sustained post-April at around double that of the last quarter of last year. Broadly, the volumes have doubled from their pre-reform steady state."

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The number of transfer value quotes requested from DB schemes administered by Towers Watson was about 50 per cent higher in February this year than in February 2014, and about 75 per cent higher in March 2015.

A transfer value is a cash sum representing the total future value of a scheme's benefits, calculated by a scheme administrator. Once given a transfer quote, members have three months to decide whether to proceed. Providers say that few, so far, are going on to transfer.

New safeguards introduced from April 6, require individuals with defined benefit transfer valuations of £30,000 or more to prove they have obtained advice from an independent financial adviser first.

Individuals with transfer valuations below this threshold are exempt from the advice safeguard.

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