UK pension redress level falling to lowest ever level

First Actuarial’s latest modelling and analysis of DB pension transfer redress show that redress payments are set to fall to their lowest ever level in 2026. Further shifts may come as the UK’s ombudsman for financial services weighs up more reforms in the processing of redresses.

A pension transfer redress payment is financial compensation paid to individuals who received unsuitable advice to transfer out of a defined benefit (or ‘final salary’) pension scheme. A redress payment is intended to put a saver back in the financial position they would have been in, had they remained in their defined benefit pension scheme.

However, it was previously perceived in the sector as being too consumer-heavy. With a large spike post-pandemic, investors might have thought that if there was a threat of future redress payments, they would be put off buying a book from a pensions pot. However, regulators have moved to redress the balance, and already to notable impact.

According to experts from First Actuarial, the number of such payments has fallen to an all-time quarterly low, thanks to a series of key changes in recent months. Consistent with the Government’s objective of regulating for growth in the financial services sector, the Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS) have been working together to identify ways of modernising the redress process.

Sarah Abraham, head of redress services at First Actuarial, confirmed, “Our modelling shows that redress payments relating to DB transfer advice are likely to fall again in Q3 2026. This is reassuring for firms that are considering transactions involving redress liabilities.”

First Actuarial has also identified two key potential developments coming out of the watchdogs’ changes, which may have a further material impact on the success of DB transfer advice complaints. Those are a proposal within Consultation Paper 26/9 that the FOS will be able to dismiss a case that has already been reviewed in line with the regulatory requirements applicable at the time of that review; and confirmation that the government will legislate to introduce a ten-year time limit for bringing complaints to FOS, with the FCA able to extend that time limit for certain products.

Accordingly, the First Actuarial Redress Tracker, now updated to July 2026, models the aggregate redress for a portfolio of notional cases. The notional portfolio reflects redress in relation to transfers from a variety of schemes, with a range of transfer dates and consumer ages. Allowance is made for transfer proceeds to have been invested in a mixed portfolio of assets. And as of the third quarter of 2026, total redress as a percentage of aggregate transfer value is expected to fall beneath 2.5% – having peaked at more than 35% at the start of 2022.

However, Abraham warned against complacency, adding, “Although redress is low at present, firms need to be aware that redress risk associated with DB transfer advice still exists. Markets could easily move in ways that lead to future redress payments increases. The best way for firms to eliminate their exposure to redress payments with confidence is to be certain that a future complaint will not be upheld.”