Despite a small increase in Q4 2023, defined benefit (DB) transfer redress fell to a record low in Q1 2024, according to OAC’s DB Redress Tracker, with redress for a typical complainant falling to £12,000.

The tracker used the 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.

This revealed that a slight softening of financial conditions such as interest rates and inflation expectations, coupled with good performance from investment markets, meant that at the start of Q2 2024 an ill-advised transferor submitting a complaint could be due around £12,000.

This is more than half what it was at the start of the year, when redress for the same individual would have been over £29,000, and remains at a historic low compared to just two years ago, when an ill-advised transferor could have claimed over £150,000.

Indeed, OAC explained that redress levels since then have dropped "markedly" following the sharp increase in annuity rates over the past 18 months, which means that many transferors could now be projected to secure a much higher level of guaranteed income from their pot.

This is expected to minimise the financial disadvantage for those who are seeking compensation after being wrongly advised to transfer their pension, and therefore the compensation they are due.

OAC head of redress solutions, Brian Nimmo, stated: “Compensation has fallen slightly since the end of 2023, reaching a new low since OAC started monitoring redress levels.

“This decline is driven, at least partly, by good returns from investment markets, with financial indicators such as interest rates and projected inflation remaining broadly stable.

“Redress rates can look quite volatile given it is calculated as the difference between two large numbers which can move in different directions which makes it difficult to second guess how redress will move in individual cases.

“As the Financial Conduct Authority (FCA) brings in new ‘polluter pays’ reforms, it will be important for financial advice firms to remain on top of compensation fluctuations as they look allocate capital against potential claims.”

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