Defined benefit pension (DB) transfer redress payments continued to fall in the fourth quarter of 2024, as a result of rising gilt yields and falling asset values, new analysis by Broadstone has revealed.
Broadstone’s DB Redress Tracker found that compensation for a typical pension transfer redress case continued to decrease throughout 2024, with the pace of decline accelerating in the final quarter, and in many, or even most, cases there may not be any redress payable.
The Tracker provides an indicator of the level of compensation due to those who were previously ill-advised to transfer out of their DB pension. It follows the example of an individual who left their scheme in 2018, aged 50, with a pension of £10,000 per year, receiving inflation-linked increases when in payment. It shows that there has been a radical decline in potential DB redress since the start of 2022, when average compensation for the use case was above £150,000.
Brian Nimmo, head of redress solutions at Broadstone, said: “The changing economic environment has driven a sea-change in DB transfer redress, primarily due to the influence of increasing gilt yields.
“There will now be many cases where no loss is experienced for those transferring out of their DB pension due to effective investment performance and the size of the original transfer value. As our Redress Tracker demonstrates, this is a radically difficult scenario from just a couple of years ago when our average complainant could have been entitled to over a hundred thousand pounds.”
However, Nimmo said that many individuals still face losses requiring redress and with the potential requirements of CP23/24 coming down the line, it is important that advisers are preparing appropriately.
“This is likely to require expert, specialist advice and actuarial support to help them scope out how much capital is needed to be set aside for possible claims,” he added.
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