The Daily Telegraph - Saturday - Money
Risks and rewards on offer for those who move their pension pots
Wealthy pension savers have increasingly ditched the security of defined benefit schemes during the pandemic in favour of easily accessible pensions, writes Jessica Beard.
The average size of a defined benefit pension being swapped for a modern “defined contribution” plan jumped by 30pc to £556,000 for the period from April to June, according to figures from LCP, a pensions consultancy. This was an all-time high, with the average value exceeding £500,000 for the first time.
Yet the total number of transfers fell, suggesting a smaller number of higher-value transfers. Fewer savers made transfers during the early months of lockdown. Switching from a defined benefit pension to a defined contribution plan gives better flexibility, but comes with far greater responsibility and risk.
Bart Huby of LCP said there had been wariness among those with smaller pensions to take on investment risk at a time of economic uncertainty. There appeared to have been an unwillingness to make major financial decisions during the lockdown period, said Mr Huby, but those with the largest pensions had been the least likely to be put off from completing a transfer.
LCP’s Sir Steve Webb said those with £500,000 pots might feel more confident about their financial security and might have invested in what they hoped would be a short-lived dip in the stock market.
‘Those with big pension pots have felt more confident to take the leap and time markets’