Pension redress payments set to shrink further

Broadstone’s latest quarterly tracker indicates that compensation payouts for individuals who received incorrect advice to transfer out of defined benefit (DB) pensions will continue to shrink in the final quarter of 2026. The DB Redress Tracker projects that most cases will still show a net gain rather than a loss, with the central estimate now at £65,000, up slightly from £59,000 in the third quarter. When a transfer results in a gain, no compensation is required because the individual ends up in a better financial position.

The small rise in gains stems from higher bond yields in the third quarter, which reduced the value of DB liabilities surrendered during transfers. Personal pension plan returns have had minimal effect, remaining close to neutral. Broadstone’s analysis suggests that affected individuals, particularly those who transferred earlier or whose investments have underperformed, may still qualify for redress. The tracker’s calculations are based on a sample portfolio aligned with Financial Conduct Authority (FCA) guidelines, using returns that match the FTSE UK Private Investor Income Total Return Index.

A case study illustrates the impact on a 50-year-old who left their DB scheme in 2018 with an annual pension of £10,000, including inflation-linked increases. The updated tracker now accounts for a broader spectrum of outcomes, capturing both the highest gains and the largest losses. Rising bond yields remain the primary driver behind the declining redress amounts in the fourth quarter, extending a trend observed over recent years.

Read Also: GISBH case trial set after representation rejected

Simon Robinson, a senior consultant and actuary at Broadstone, highlighted that market fluctuations complicate future projections. While inflation could temporarily increase redress levels, higher bond yields may counteract those effects. Additional uncertainty arises from equity market volatility. Robinson also noted that redress calculations depend on market conditions from the prior quarter, which can quickly lose relevance. This delay ensures that offers made to affected individuals align with past valuations, preventing either party from influencing the assessment dates.

Broadstone’s findings reflect ongoing adjustments in the financial system for DB pension transfers. The tracker’s methodology ensures consistency with regulatory standards, though the evolving market creates challenges for accurate forecasting. Affected individuals should remain aware that compensation offers may not fully capture current economic conditions due to the quarterly lag in data.