Figures from the pension consultancy LCP show that interest in transfers out of defined benefit schemes has dipped again during the second national lockdown, but the consultant said they expect requests to leap up next year.
LCP said that as a range of government support mechanism such as the furlough scheme come to an end, it is widely expected that corporate insolvencies will rise significantly. The consultancy believes the resulting pressure on household finances is likely to lead to more people over 55 considering accessing their accrued pension rights.
The consultancy said that large-scale redundancies could lead people to consider accessing the typically larger sums tied up in defined benefit pensions. The consultancy also said that historically in companies where a bankruptcy is expected, there can be a flurry in interest in transferring out to reduce the risk of ending up in the Pension Protection Fund.
LCP’s analysis of over eighty defined benefit schemes with over 65,000 members, showed a significant dip in transfer requests during both national lockdowns.
At the start of the year, prior to the first lockdown, there were just under 50 quotation requests in a typical week amongst these schemes, and this fell by half during the first lockdown. Volumes recovered somewhat over the summer and early autumn, rising to around 37 per week, but have fallen back to around 30 requests since the start of November. Although the second lockdown has not led to the same slump in demand for transfer quotes, it has still had a modest depressing effect on interest in transfers.
Bart Huby, partner at LCP said: “Interest in a potential pension transfer has been depressed during 2020, especially during the first and second lockdown periods. But 2021 may be very different and there is a real risk of a ‘gold rush’ of people looking to access their DB pensions.
“Emergency Government measures to support businesses are expected to end in the first half of 2021 which could lead to a surge in unemployment and companies going bust.
“Older workers who lose their job may be very tempted to consider accessing their DB pension in order to meet vital household bills.”