Defined benefit (DB) pension transfer redress payments are expected to remain at historically low levels in the first quarter of 2026, according to the latest projections from First Actuarial.

Updated modelling from the firm showed that total redress as a proportion of aggregate transfer value has continued its steady decline since peaking in late 2021 and early 2022, when redress levels exceeded 35 per cent.

As at 1 January 2026, First Actuarial’s tracker indicated redress of around 2-3 per cent of aggregate transfer value, reinforcing expectations that overall compensation levels will remain subdued.

Commenting on the findings, First Actuarial head of redress services, Sarah Abraham, said the firm’s modelling continued to show that most consumers had not suffered a financial loss as a result of transferring out of a DB pension and therefore would not be entitled to redress.

She added that while recent market movements may marginally increase compensation for those who experienced a loss, overall redress payments were still expected to remain low.

Indeed, while the tracker highlighted some short-term volatility linked to changing market conditions, the longer-term trend pointed to a significant reduction in redress exposure over the past four years.

This reflected higher interest rates and improved relative outcomes for many DB transfer cases.

Meanwhile, the update also followed further relief for personal investment firms that advised on DB transfers.

In December, the Financial Conduct Authority (FCA) confirmed it would not proceed with plans to introduce capital deductions linked to DB transfer redress.

Under the regulator’s original proposal, firms would have been required to calculate potential redress liabilities, hold additional capital to cover them, and comply with new reporting requirements.

Abraham said the regulator remained focused on ensuring firms met their redress obligations, noting that the FCA had issued a series of communications aimed at preventing firms from walking away from their liabilities.

Although the proposal to explicitly set aside capital for redress will not be implemented, she warned that firms would still be expected to comply with the regulator’s ‘polluter pays’ guidance and may therefore wish to understand their potential exposure to future redress payments.

She also highlighted that redress risk continues to be closely scrutinised in corporate activity across the advice market.

"We continue to see M&A due diligence processes identifying the risk of future redress payments arising from pensions transfer advice.

"Firms looking for a purchase should therefore take a close look at their book of transfer advice," Abraham concluded, adding that firms should consider defined contribution (DC) transfer advice as well as DB, because "we continue to see compensation being required in relation to the former”.

---