Why no loss doesn’t mean no risk in today’s redress market

What happened?

Today’s gilt environment has produced a growing number of ‘no loss’ outcomes on historic defined benefit transfer cases. Redress has shifted from being driven mainly by DB transfer complaints escalated through claims management companies or the Financial Ombudsman Service, towards becoming a critical component of M&A due diligence.

Firms are no longer just asking “what is the loss today?” but increasingly “what could this look like under different market conditions?” Many are now reversing the traditional process, running redress calculations on higher-risk samples first to quickly establish whether losses exist before committing to full suitability reviews.

Why does it matter?

A ‘no loss’ result reflects conditions at a specific point in time, not a permanent state. If gilt yields were to fall materially, cases that look benign today could quickly become loss-making, and regulatory methodology may also evolve.

An effective redress strategy now requires forward-looking scenario testing, not just retrospective calculation.

Who is affected?

Wealth managers and consolidators holding legacy DB transfer risk, and firms assessing books of business for acquisition.

Key risks

• Treating today’s ‘no loss’ position as permanent rather than point-in-time.
• Overlooking higher-risk cohorts, such as larger transfer values, older cases from 2016–2017, and advice given to younger clients.
• Failing to scenario-test exposure against falling gilt yields or evolving FCA methodology.
• Applying an inconsistent approach to individual FOS-upheld cases versus book-level M&A due diligence.

Actions to take

1. Prioritise review of higher-risk cases first: larger transfers, older cases, younger clients and higher-risk investment choices.
2. Run redress calculations ahead of full suitability reviews to quickly establish whether losses exist.
3. Build scenario testing that models outcomes under different yield environments.
4. Tailor methodology to the firm’s objectives, using detailed calculations for individual FOS cases and point-of-sale or market-index approaches for book-level M&A reviews.

Wider implications

Redress is becoming embedded in wider governance and acquisition strategy rather than treated as a standalone complaints process. Consolidators willing to acquire DB transfer books previously avoided need robust forward-looking analysis to price that risk appropriately.

Recommendations

At TCC, our team combines deep technical redress expertise with independence, helping firms quantify, manage and resolve redress obligations, from a single calculation to a strategic view across hundreds of historic cases.