Defined benefit (DB) pension transfer redress payments are expected to fall to their lowest level ever in the third quarter of 2026, according to projections from First Actuarial.

The downward trend and anticipated changes to the assessment of pension transfer complaints were likely to result in firms that are making acquisitions feel more comfortable about taking on the books of historic DB transfer advice, the firm noted.

Legacy pensions transfer advice would therefore potentially be seen as a lower barrier to independent financial adviser (IFA) consolidation.

“Our modelling shows that redress payments relating to DB transfer advice are likely to fall again in Q3 2026,” said First Actuarial head of redress services, Sarah Abraham.

“This is reassuring for firms that are considering transactions involving redress liabilities.”

However, while redress was currently low, Abraham warned that firms needed to be aware that redress risk associated with DB pension transfer advice was still present.

“Markets could easily move in ways that lead to future redress payments increases,” she stated.

“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.”

First Actuarial also pointed to work from the government, Financial Conduct Authority (FCA), and Financial Ombudsman Service (FOS) to modernise the redress process.

Two key developments highlighted that could have a material impact on the success of DB transfer advice complaints were a consultation proposal that would enable the FOS to dismiss a case that had already been reviewed in line with the regulatory requirements, and the government legislating to introduce a 10-year time limit for bringing complaints to the FOS, with the FCA able to extend that time limit for certain products.

“We know that many firms have reviewed their DB pensions advice,” Abraham said. “But at the present time, this doesn’t completely extinguish the risk of a future complaint being upheld.

“A change in the FOS dismissal grounds, as proposed, would give firms more comfort that their redress risk can be closed off.

“Similarly, there is currently no time limit for bringing complaints about pensions advice to FOS. This exposes firms to the possibility of redress payments in relation to DB transfer advice written many years ago. Any time limit on such complaints should therefore be welcomed by advising firms.

“We are seeing buyers turn away from some transactions due to uncertainty around potential redress payments, particularly given how sensitive redress is to market conditions.

“While I would still expect firms to go through a due diligence process before taking on books of DB transfer advice, I believe that we are moving in a direction that will remove some of the existing barriers to transactions.”

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