It is also £3.1bn higher then the first quarter of 2017, when £7.5bn in pension transfers were recorded, while in Q1 2016 only £2.4bn was transferred.
The latest ONS results further revise the total value of pension transfers in 2017 up by £2.5bn to £36.8bn.
‘Stampede to quit’
Tom Selby, senior analyst at AJ Bell, said the figures reveal that “the stampede to quit” guaranteed DB pension schemes shows no sign of slowing down.
Further, he said figures confound predictions DB transfers peaked in 2017.
“We have witnessed a perfect storm for DB transfers in the UK, with a combination of the attractiveness of the pension freedoms, high transfer values and headlines about high-profile companies – most notably BHS and Carillion – going bust all undoubtedly influencing people’s decision to exit,” Selby said.
He said the Q1 ’18 figures likely include a large number of transfers away from the British Steel Pension Scheme.
“Over time, pensions transfer volumes should edge downwards as the number of people with significant funds eligible for a transfer diminishes, but as things stand we remain in the eye of the storm.
“Those who have decided to move their pot away from the security of DB will now need to take a much more active role to ensure they get the retirement they want,” Selby said.
Pensions and ISAs exempt from IHT
On the same day as the ONS released its results, AJ Bell also called for the government to exempt pensions and individual savings accounts (ISA) from inheritance tax (IHT).
The firm pushed for the policy change in response to the Office of Tax Simplification’s recent call for evidence on IHT.
Currently, AJ Bell says “arcane HM Revenue & Customs rules” force most providers to exercise discretion over how pension death benefits are paid out.
“This is because; where discretion is not used, or a pension is transferred, or contributions increased while someone is in serious ill-health, the money left behind is subject to IHT. This could leave their loved ones with a 40% tax bill,” a spokesperson said.
Further, discretion can lead to significant delays in making payments while all necessary information is gathered, the spokesperson said.
Peter Hopkins, technical director as AJ Bell, said: “The government could remove these costs at a stroke by exempting all pension death benefits from IHT, including those paid without discretion. It makes no sense for schemes to second guess nominations solely to avoid IHT.
“This is an anachronism that doesn’t fit pensions in the 21st century.
“At the same time, the government should consider making ISAs exempt from IHT so there is one simple set of IHT rules covering long-term savings whether they are in an ISA or pension tax wrapper,” Hopkins said.