The quarterly Defined Benefit (DB) Redress Tracker from leading independent financial services consultancy Broadstone shows compensation due to those who were previously ill-advised to transfer out of their DB pension continues to fall to record lows.
Broadstone’s DB Redress Tracker follows the example of an individual who left their scheme in 2018 aged 50, with a pension of £10,000 p.a. which would receive inflation-linked increases when in payment. The Tracker is developed in line with Financial Conduct Authority (FCA) rules for calculating redress with the individual assumed to have invested their funds to earn returns in line with the FTSE Private Investor Index.
Continued increases in yields through 2024 have caused redress levels to decline representing a radical decline from the start of 2022 of around 98%, as financial conditions have softened and rates have soared.
The Redress Tracker data shows significant falls in redress values over the years. In the earlier period, redress values were relatively high reflecting the period of lower gilt yields.
Through 2022, as gilt yields began to rise steeply, there was a noticeable decline in redress values. Although more recently the rate of decline in redress has slowed with it effectively flattening over the last two quarters, it has still continued to tick down.
The range within which redress can fall will depend on the generosity of the original transfer value and the investment performance since. It is now becoming more common for there to be no redress payable in many cases.
Brian Nimmo, Head of Redress Solutions at Broadstone, said: “The landscape of defined benefit pension transfers and redress has evolved significantly since 2018, primarily influenced by rising gilt yields.
“While many individuals still face losses requiring redress, there are also cases where no loss is experienced due to effective investment performance and the size of the original transfer value.
“For financial advisers dealing with potential redress claims, it makes planning difficult especially with the potential requirements of CP23/24 coming down the line. Getting expert advice in this area is going to be crucial for them. ”
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