People who were ill-advised to transfer out of their DB pension are now likely to be due significantly less compensation, according to actuaries and financial services consultancy OAC.

The compensation amounts have been hit by the rapid rise in annuity rates in the last 18 months.

OAC’s defined benefit redress tracker followed the example of an individual who left their scheme in 2018 aged 50, with a pension of £10,000 a year, which would receive inflation-linked increases when in payment.

It found that if the individual had made a compensation claim in January 2022 they could have been entitled to around £160,000. But by July 2023 the compensation amount had slipped to just £50,000.

Brian Nimmo, head of redress solutions at OAC, part of the Broadstone Group, said: “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.

“However, over the past 18 months we have seen a shift in the market with the rapid rise in projected annuity rates meaning 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.”