The ongoing review of the financial ombudsman service (FOS), along with broader attempts to lighten the regulatory load, offers a "significant" opportunity to rebalance the relationship between consumers and advisers in pension redress cases, First Actuarial has suggested.

The firm called for a "fresh approach" to assessing whether to uphold complaints about pension transfer advice, proposing that assessments consider various factors, including low redress payments.

First Actuarial head of redress services, Sarah Abraham, said redress was important because “there will always be genuine cases where people’s lives have been decimated by poor pensions advice.”

“But working on the basis that the consumer is always worse off after transferring out of a defined benefit (DB) scheme is unhelpful,” she continued.

“The high uphold rate of DB pensions transfer complaints rests on the assumption that consumers have suffered significant material harm due to giving up their guaranteed pension.

“In many present-day cases, the consumer is assessed to be better off due to the advice to transfer. These cases are emerging against a backdrop of falling redress payments.”

Abraham added: “Our most recent update to the redress tracker showed that the likely redress on a DB transfer advice book remained below 5 per cent of the total transfer value, even allowing for the recent volatility of some asset classes.

“This is a sharp decrease from four years ago when redress was typically around 40 per cent of the transfer value,” she said.

In her first Mansion House speech, Chancellor, Rachel Reeves, acknowledged that many in the industry have identified redress as a “drag on investment” and a source of uncertainty in the sector.

As part of its ‘New approach to ensure regulators and regulation support growth,’ the government therefore confirmed that the role of the FOS would be assessed simultaneously.

“In my mind, that means making the FOS more business-friendly and upholding cases only where consumers have genuinely been poorly advised,” Abraham argued.

“And it means reconsidering the relative value of DB and defined contribution pensions in light of current market conditions rather than those of several years ago.”

Abraham concluded: “The Financial Conduct Authority's starting point is that most consumers are best advised to stay in a DB scheme. This drives FOS decision-making, which is too simplistic and fails to consider movements in redress payments and the value consumers place on pension flexibility. It’s important to look at the big picture.”

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