Defined benefit (DB) pension transfer redress continued to fall in the second quarter of 2024, with compensation for a typical complainant hitting a record low of around £6,600, Broadstone has revealed.

This represents a further decline from the previous record low of £12,000 recorded in Q1 2024.

Broadstone’s DB Redress Tracker shows compensation due to those who were previously ill-advised to transfer out of their DB pension, using an example of an individual who left their scheme in 2018 aged 50, with a pension of £10,000 per annum, which would receive inflation-linked increases when in payment.

The tracker showed that yields have continued to increase in the first half of the year which, alongside a “modest” increase in asset returns, resulted in a further decrease in the redress payable to a typical complainant, as the rise in annuity rates meant many more transferors could secure a higher level of guaranteed income from their pot.

This minimises the financial disadvantage for those seeking compensation after being misadvised to transfer their pension, and therefore the redress they are due, Broadstone noted.

Continued yield rises in Q2 2024 alongside the slight increase in assets returns meant redress levels fell to approximately £6,600, representing a “radical decline” from the start of 2022 when compensation for a typical complainant was more than £150,000, which was due to ‘softening’ financial conditions as rates rose.

In 2024 so far, redress has seen smaller declines following sharp falls in 2022 and 2023.

“Yields continued to rise through the first half of the year which, alongside a modest increase in asset returns, has led to a further decrease in the redress payable to our notional consumer,” commented Broadstone head of redress solutions, Brian Nimmo.

“Time will tell as to what the impact of the new government will be on the markets and whether yields will come back in, which would lead to redress increasing again.

“Redress rates can appear volatile given it is calculated as the difference between two large numbers which can move in separate directions making it tricky to second guess how redress will move in individual cases.

“With this in mind, and especially as the Financial Conduct Authority brings in new ‘Polluter Pays’ reforms, it is vital that financial advice firms remain on top of compensation fluctuations to allocate requisite capital against potential claims.”

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