Defined benefit pension transfers – performance statistics

Inflation expectations in the UK have resulted in increases in long-term interest rates as markets price in future expected base rate increases by the Bank of England.  These long-term interest rates are a key component of the valuation of defined benefit pensions.  These interest rate expectations have increased significantly in recent months – in particular the forward rates (10 year) which are a key component to annuity pricing.

Pension performance values

We use our proprietary model for a hypothetical deferred defined benefit pension – the performance is shown in the chart below relative to a starting value of 31/03/2017.

Personal pension plan - Benchmark index performance

We use the FTSE Private Investor Income Index (PII) and the FTSE All Share Index (weighted 50:50 with PII) to represent the personal pension plan.

Relative performance – ratio of pension to benchmark index

A loss position generated at the series of dates shown, as a result of a transfer, is when the value noted below is greater than 100.