Savers who were advised to transfer a defined benefit (DB) pension are now due around two-thirds less compensation compared to the start of 2022 thanks to "soaring" annuity rates, according to analysis from OAC.

OAC’s DB Redress Tracker, which is based on an example saver who left their scheme in 2018 aged 50, with a pension of £10,000 p.a. receiving inflation-linked increases, showed that a transferor making a compensation claim in January 2022 could have been entitled to around £160,000.

However, that slipped to £50,000 as of July 2023, suggesting that that many people who were previously advised to transfer out of their DB pension are likely to be due significantly less compensation.

OAC explained that redress has typically ranged between £100,000 and £150,000 since 2018, as supressed annuity rates minimised the replacement income that transferors could have secured had they sought redress in the period to 2022.

"Soaring" annuity rates over the past 18 months, however, mean that many transferors will now be projected to be able to secure a historically high level of guaranteed income from their remaining pension pot.

According to the firm, this will minimise the financial disadvantage for those who are seeking compensation after being poorly advised to transfer their pension, and therefore the compensation they are due.

OAC head of redress solutions, Brian Nimmo, commented: “DB pensions offer huge security and peace of mind through retirement. The compensation process is in place to help retirees who suffered from poor advice that led to the loss of this guaranteed income throughout retirement.

“However, over the past 18 months we have seen a shift in the market whereby the rapid rise in projected annuity rates has meant people who did transfer out are now assumed to be able to secure far higher levels of guaranteed income.

“It mitigates the financial damage suffered by many DB transferors and means that they could be due significantly less compensation if they were to bring their case for compensation now.”

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