Why has my pension transfer value gone down?

Have you recently checked your Final Salary (defined benefit) pension only to find your transfer value has dropped? Pension values go up and down all the time, but seeing your transfer value suddenly fall can set off even the calmest retirees-to-be. Before you rethink your retirement plans, let’s clear up what could be driving the drop, whether transferring your final salary pension still makes sense, and if you’re owed compensation after transferring on the back of poor advice.

• Pension transfer value vs. pension fund value. Why the difference?
• What’s making your pension transfer value fall right now?
• How pension transfer values are calculated
• Can you challenge a suspiciously low pension transfer value?
• Should you transfer your pension or stay put?
• Did you know pension transfers can be mis-sold?

Pension transfer value vs. pension fund value. Why the difference?

Your final salary pension fund value is what your investments are worth today. But your pension transfer value – the amount your provider will hand over if you leave – often looks smaller. Why? Because pension companies factor in scheme costs, charges, and a bit of “financial self-preservation” before letting you walk away with your pot.

Simply put:

• Pension fund value – Total worth of your pension investments if they stay put, based on market performance.
• Pension transfer value – The amount your provider will give you if you transfer out after added costs, etc.

What’s making your final salary pension transfer value fall right now?

So, what exactly triggered the latest dip in your transfer value? Here are the likely culprits:

• Rapid interest rate rises and gilt yields – Pension providers use gilt yields (returns on UK government bonds) to price transfer values. When gilt yields rise, transfer values fall. A jump from 1% to 4% could slash your transfer value by 20% or more.
• Inflation rates and longer life expectancy – Higher inflation means pension schemes expect to pay out more in the future, reducing transfer values today. Plus, as people live longer, schemes anticipate longer payouts, further lowering what they offer.
• Scheme funding position and provider-specific charges – If your pension scheme is underfunded, it’ll cut transfer values to protect its finances. Add exit fees and hidden deductions, and your transfer value can shrink even further.

How pension transfer values are calculated

Your transfer value isn’t a random number plucked from a hat – it’s calculated based on several key factors:

• Market conditions – Think interest rates, inflation rates, bond yields, and general stock market chaos.
• Scheme funding position – The financial health of your pension scheme – is it robust or limping?
• Annuity rates – The actual cost of securing your guaranteed income for life.
• Your age vs normal pension age – Further away from retirement age? Your value gets discounted more.

Bottom line? Pension transfer values are not fixed – expect fluctuations, especially during turbulent market conditions.

Can you challenge a suspiciously low pension transfer value?

If your pension provider’s given you a transfer value that’s lower than expected, you might feel short-changed – and rightly so. The good news is you don’t have to accept it quietly.

• Request a re-evaluation – Ask your current provider to recalculate your transfer value based on a fair representation of current market conditions.
• File a complaint – If you think your pension company reduced your transfer unfairly, gently push back and air your concerns.
• Check for hidden scheme costs – Double-check that your provider hasn’t quietly applied exit fees or other sneaky deductions.

Should you transfer your pension or stay put?

Your pension transfer value’s taken a knock – do you transfer anyway or sit tight? Here are some big-picture questions you should think about:

• Would staying in your current scheme offer more long-term security for your annual pension income?
• Are you comfortable swapping guaranteed benefits for a cash lump sum that’s influenced by market developments?
• Have you checked the long-term impact? A lower transfer value means locking in a loss. Unless you have a solid investment plan, transferring at a low point could hurt your income.

What’s the next step?

Before making any decision, get a second opinion – from a loved one or a professional transfer specialist. There’s no reason to keep this to yourself when help is available.

Do you know about mis-sold pension transfers?

Not all pension transfers are bad, but if you weren’t given the full picture before moving your pension, you could have been mis-sold. Maybe your adviser didn’t explain that transferring out of a defined benefit pension meant losing guaranteed income.

Perhaps they pushed the transfer as a limited-time opportunity, downplayed the risks, or even had a financial incentive to encourage the move. If your new pension isn’t performing as expected, has higher fees, or feels riskier than you were led to believe, you might have grounds for a claim.

Get your money back – starting today!

The team at Spencer Churchill Claims Advice know how to fight for what’s yours: no upfront costs, no jargon, just a straight answer on whether you have a mis-sold pension transfer claim. If you do, we’ll do everything we can to recover every penny you’re owed. Don’t let bad advice cost you your retirement. Get in touch now for a free, no-obligation chat.