IFA Newsletter September 2025

This reflects increasingly generous annuity rates (see below) and stable transfer values over the last couple of years.

Over the last few years, annuity rates have risen significantly due to higher gilt yields, driven by increased interest rates and government policy changes. Inevitably, therefore, annuity have become increasingly popular – particularly for those entitled to an enhanced rate How annuity underwriting needs to change to meet Consumer Duty.

Previous research conducted by Grove suggested that around 1 in 4 individuals close to retirement age could, in fact, secure a greater monthly income by transferring from their DB scheme and purchasing an annuity on the Open Market, and this proportion is likely to have grown.

As such, if you have a client with a Defined Benefit pension nearing their scheme’s default retirement age, it is more important than ever that you obtain a CETV and consider all options – even if they want a fixed / guaranteed lifetime pension.

As anticipated by many – including in our June newsletter – the Monetary Policy Committee (MPC) voted by a narrow majority of 5–4 to cut the Bank Rate by 0.25 percentage points, bringing it down from 4.25% to 4.0%. This decision comes despite inflation remaining well above the 2% target and reflects concerns about the pace of economic growth. Bank Rate reduced to 4% – August 2025 | Bank of England.

Nevertheless, with inflation proving ‘sticky’ and government borrowing at record levels, we’ve yet to see any meaningful decline in gilt yields or a corresponding rise in average transfer values. And with few expecting a major shift in the broader economic outlook, significant changes on these fronts seem unlikely in the near term.

More than half of pension transfers are now completed within four weeks, according to recent research by Grove. Analysis of transfer data from the past six months reveals a significant improvement in processing times: around 18 months ago, the typical transfer took more than two months.

This faster turnaround may partly reflect a decline in the overall volume of transfers – as indicated by the XPS Transfer Activity Index Tracker – XPS Group. Additionally, the waiting time for the MoneyHelper pension scams call has also shortened.

Following the completion of the consultation earlier this year, further details of the government plans to include pensions in IHT were released on 21st July. Inheritance Tax on pensions: liability, reporting and payment — Summary of responses – GOV.UK

Whilst people with estates totalling less than £1m remain largely unaffected, for the thousands of others this will become an increasing consideration in advice as we approach the April 2027 implementation.

Given the potential impact, a number of companies have published information to help understand the full implications of this; a useful round-up can be found here: Unlocking the Future of Estate Planning: Adapting to New Inheritance Tax Rules for Pension Funds from April 2027 – Scottish Widows Platform, whilst this link summarises and explains the latest post-consultation news: Inheritance tax on pension death benefits from April 2027 – Royal London for advisers

The Grove Pensions Solutions (GPS) CETV Index provides an average CETV based on a £10,000 per year pension. This is calculated by analysing the actual CETV and benefit value of thousands of ‘real-world’ CETV’s calculated since January 2024. This is unlike other indexes that use a ‘typical’ CETV based on assumptions.

The following chart is based on analysis of thousands of real CETV’s calculated since January 2024.