Defined benefit pension transfers

A defined benefit (DB) pension – also known as a final salary pension – is an occupational pension scheme that pays you a guaranteed income when you retire. How much money you get when you retire is based on your salary and how long you’ve worked for your employer, not how much you’ve paid into your DB pension.

We may be able to pay you compensation if you were given unsuitable advice to transfer out of your DB pension to a different pension and you lost money as a result. The adviser must have gone out of business for us to be able to help. It also must have been regulated by the Financial Conduct Authority (FCA) at the time it gave the advice.

Examples of other pension schemes you may have been advised to transfer your DB pension to include personal pension plans, self-invested personal pensions (SIPPs), qualifying recognised overseas pension schemes (QROPS) or Section 32 pension plans.

How do we calculate DB pension transfer advice claims?

When we assess your claim to see if you’re eligible for compensation, we gather information about your DB scheme and evidence of the advice you received to transfer out of it. We’re trying to work out if your financial adviser gave you unsuitable advice and didn’t satisfy its ‘duty of care’ under the rules in place at the time of the advice (which can differ from today's rules).

If the evidence we see shows the advice you received was unsuitable we can pay you compensation. The next step is to work out how much money you're owed.

To calculate this, we gather up-to-date transaction histories and valuations of your current pension scheme (the one you were advised to transfer to). We then compare the benefits you’ve lost from your DB pension with the benefits in your current pension to find the difference between them. This difference tells us how much compensation we can pay you, up to our £85,000 compensation limit for pension advice (set for us by the FCA and the Prudential Regulation Authority).

We also take into account the pension policy charges and the cost of any ongoing, regular charges from any adviser you were using at the point you made your claim with us. We then get in touch to tell you our decision and how much compensation you'll receive.

Pension transfer advice claims are complex and we follow guidance from the FCA (FG17/9) on how to go about calculating any compensation that's due. FG17/9 was last updated in March 2021 and the FCA published some further clarifications to this guidance on 1 September 2021.

Put simply, we’re aiming to work out how much your DB pension would have been worth if you hadn’t transferred out of it and, therefore, how much money you've lost by moving to a different pension.

Why does compensation vary for people who are part of the same scheme?


It's common for people who are part of the same pension scheme to receive different amounts of compensation for pension transfer advice claims, even if their circumstances appear alike on the surface, e.g., they worked at the same company for a similar number of years. The British Steel Pension Scheme (BSPS) provides one example of this.

BSPS is a complex DB pension scheme with many different segments, or levels, of benefits. A steelworker could build up a variety of segments at various points in their time at British Steel and all of these segments would have increased in value at different points in time and at varying rates.

This means that each steelworker’s circumstances are unique and even though their pensions might initially appear similar, when we delve into the details we often find that the different levels of benefits they accrued mean their pensions were worth very different amounts.

This means that any compensation they’re due for the advice they received to transfer out of their British Steel DB pension will also vary.

Some other factors that can affect how much compensation you're eligible for:

  • What kind of pension you transferred to.
  • How far away from retirement you were when you switched.
  • Your ongoing running costs of managing your pension.
  • How the market is expected to perform, which could affect your pension investment.
  • Whether you received an enhancement when you transferred your pension.
  • Economic assumptions around future inflation and interest rates.
  • The cost of any ongoing, regular charges from an adviser you’re using at the point you make a claim with us.

Possible claim outcomes

While we can’t guarantee the outcome of a claim until we've finished investigating it, we may be able to pay you compensation if you can prove you lost money because of the unsuitable advice you were given to transfer out of your DB pension.

Some common reasons why we aren’t able to pay compensation:

  • We haven’t seen any evidence of the advice you were given.
  • There’s no evidence you lost money directly as a result of the advice you were given.
  • There’s no evidence you made a loss.
  • There are rules around the dates you can make a claim – so your claim could fall outside the eligible dates.

Find out more about our protection for pensions.

Who else could help?

If you think you might have received unsuitable advice to transfer your pension and the adviser is still trading, you'd firstly need to take up your complaint with the firm who gave you the advice. If that doesn't work, the next step would be to contact the Financial Ombudsman Service.

While we protect the advice you received to transfer out of your pension, our protection doesn’t include DB pension schemes themselves. The Pension Protection Fund protects these. The Pensions Regulator also protects the UK’s workplace pensions.

Beware of pension scams

Unfortunately, scammers can convince people to transfer their life savings to schemes that sound attractive and offer high returns but are actually scams. People can lose their entire pension and then face an uncertain future.

Even if you consider yourself to be financially savvy, it's still important to be aware of scammers and the methods they employ. Read more about pension scams on The Pensions Regulator website.

For more information about scams and how to protect yourself, please visit our scams and fraudsters page.