Recent market volatility could reverse the three-year downward trend in defined benefit transfer compensation, according to Broadstone.
New data from the pensions consultancy shows that compensation for a typical pension transfer redress case continued to fall through the first quarter of 2025, dropping from around
-£16,000 at the end of 2024 to around -£22,000 at the end of March.
However, market volatility over the past week has reversed all of the downward movements recorded through the first three months, with indicative compensation levels now back to around -£16,000.
If markets continue to fall, then it is likely that redress levels will continue to trend upwards in the second half of the year.
Broadstone’s DB Redress 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, which would receive inflation-linked increases when in payment. With financial conditions softening and rates rising, the tracker has shown the radical decline in potential DB redress rates 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 recent market turmoil has the potential to shift the redress landscape – what has been a consistently downward trend for the past three years now points towards the possibility of a reversal as we look towards Q3 2025.
“Moreover, while the average level of redress may have dipped in Q1 2025 we’re still seeing many cases where compensation is due, particularly where transfer values were low or where investment performance has been poor. This reinforces the importance of claimants and their advisers reviewing each case on its own merits.”
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