One of these key points is solvency, as she explains: “Scheme funding levels have already been adversely affected by continuing low interest rates and this has now been exacerbated by falling asset values.
"Increased cash outflow at such a time could potentially be the factor that tips the balance of solvency.”
Trustees may also factor in other pragmatic considerations, as Ms. Tait points out: “Although requests for transfers have fallen in recent months, most schemes have been coping with massively increased volumes of transfers since the introduction of pension freedoms and their administrative resources are operating at maximum capacity.
"This often leads to mistakes, which add to the resource issues, so some schemes may well believe that a three-month break will help them to get back on track.”
Pension-scheme problems
Henry Tapper, chief executive of AgeWage, also sees issues with capacity and solvency – and believes the impact of the pandemic could become more serious, as he explains: “I’ve been speaking to actuaries who say that 40 per cent of their clients are not providing DB transfer quotes over the lockdown, for three reasons.
"The first is operational – most pension administration units are dealing with high-priority claims. DB transfers are not as high on their list.
“Also, trustees are concerned about the vulnerability of scheme members, who may be anxious and taking decisions about their pensions that they might later regret.
“The third concern is around insufficiency reports. Pension Protection Fund (PPF) figures are showing a deficit increase.”
The PPF 7800 index April update shows that the aggregate deficit of the 5422 schemes in the index increased to £135.9bn at the end of March, up from £124.6bn at the end of February.
Mr. Tapper says: “It looks like some pension schemes will go bust – into the PPF and trustees are unwilling to pay out the full transfer amount for a DB transfer if the scheme is going into the PPF.”
It is uncertain how long the impact of the pandemic on DB transfers is likely to continue, as Mr. Tapper says: “Whether this is a long-lasting situation depends on how quickly the market can recover – and we are going into a recession or depression.”
Carl Lamb, director at Smith & Pinching financial advisers believes the current situation may be the ‘new normal’: “I expect it to be long-lasting, which you could potentially argue is a good thing,” he comments: “Some DB transfers may have been made not on the basis of good judgement but on high numbers.”
