Pension savers who were wrongly advised to switch out of DB schemes have seen the compensation they are entitled to fall further, thanks to rising gilt yields, which have pushed up annuity rates.
Actuarial consultancy OAC, part of the the Broadstone Group, has been tracking this redress and has found compensation payments have effectively halved over the last three months.
Its figures follow the example of an individual who left their scheme in 2018 aged 50, with a pension of £10,000 a year, with inflation linked increases throughout retirement.
It found that someone applying for compensation in the first quarter of 2022 could have been entitled to a lump sum payment of £165,000. This fell significantly to just over just over £50,000 in Q2 2023 and in the three months since has more than halved again to around £22,000 (Q3 2023).
Since 2018, redress has typically ranged between £100,000 and £150,000 as supressed annuity rates minimised the replacement income that transferors could have secured had they sought redress in the period to 2022.
Despite this significant fall, OAC says that if the funds are used to secure an annuity members should receive the compensation they are due.
OAC head of redresss solutions Brian Brian Nimmo says: “Our DB redress tracker seeks to illustrate the levels of compensation available to those making a claim against poor advice when they transferred their pension.
“It demonstrates what the rise in gilt yields has meant that those who did transfer their DB pension are now able to secure a healthy guaranteed income through the annuity market.
“While this mitigates the potential financial damage from transferring a DB pension, it does mean that many could now be due significantly less compensation if they were to make a claim now.”
The redress tracker has been developed in line with Financial Conduct Authority rules for calculating redress with the individual assumed to have invested their funds to earn returns in line with the FTSE Private Investor Index.
