Redress due to people who were misadvised to transfer out of their defined benefit (DB) pension rose for the first time in two years at the start of Q1 2024, according to OAC’s DB Redress Tracker.

The tracker bases its modelling on an example individual who left their scheme in 2018 at age 50 with a pension of £10,000 per year, which would receive inflation-linked increases when in payment, and invested their funds to earn returns in line with the FTSE Private Invest Index.

At the start of Q1 2024, an ill-advised transferor submitting a complaint could be due around £34,000.

This is an increase from the £22,000 recorded in Q4 2023, with the rise attributed to falling gilt yields towards the end of the year as expectations of base interest rate cuts grew.

However, OAC noted that redress levels have still dropped notably compared to two years ago when, at the beginning of Q1 2022, complainants could have claimed approximately £165,000.

Since then, compensation levels have fallen every quarter until the start of 2024 following the sharp increase in annuity rates over the past 18 months, which meant that many could expect to secure a much higher level of guaranteed income from their pension pot.

OAC stated that this will minimise the financial disadvantage for those who are seeking redress after being wrongly advised to transfer their pension, and therefore the compensation they are due.

“Our DB Redress Tracker seeks to illustrate the levels of compensation available to those who make a claim against the poor advice when they transferred their pension,” commented OAC head of redress solutions, Brian Nimmo.

“Since the start of 2022, redress has fallen significantly due to the rise in annuity rates. This means complainants could have increasingly secured a healthy guaranteed income from their DC pot through the annuity market in place of their DB pension.

“It now looks like compensation may have bottomed out as we appear to have reached the end of the rate hiking cycle with gilt yields and annuity rates now starting to come down.

“Redress levels are still far below their historic levels due to the changed economic situation and are worth monitoring as we progress through 2024 and beyond.”

---