Some members have noticed that transfer values have reduced significantly in recent months. This is contrary to the general trend over many years before that where transfer values have gradually increased. We therefore thought it would be useful to explain how transfer values are calculated and then how recent changes have caused transfer values to reduce.

There are various factors that affect the expected cost of your pension benefits, and subsequently your transfer value, that you have built up in the Group:

• Expected investment returns on the assets held by the Scheme - if investment returns are expected to be higher, this means that a lower amount of money needs to be set aside today to cover the same cost in the future
• Expected future inflation - if expectations of future inflation are lower, the expected cost of your benefits will be lower
• Expected life expectancy - if people are expected to live for a shorter period, the expected cost of your benefits will be lower

For transfer values, expected investment returns are related to the yield on government bonds, which are influenced by economic factors such as the government's fiscal policy and the Bank of England's monetary policy. Since the end of March 2022, expected investment returns on the assets held by the Scheme have increased significantly.

While there has also been an increase in the outlook for inflation expectations in the short term, which would act to increase the expected cost of your benefits, this has been significantly outweighed by the impact of materially higher expected investment returns. This means that, overall, transfer values have reduced significantly because a lower amount of money is needed to cover the expected cost of your benefits in the future.

In a similar way, the assets held by the Group are matched with assets that will pay the value of benefits due to members and the value of the Group's assets has therefore reduced in value since the end of March 2022. But because the value of liabilities has also fallen significantly, the Group's financial position overall has remained strong.