The core principle: back to the position you would have been in
The starting point for redress is simple to state: you should be put back, as far as money can, into the position you would have been in if the unsuitable advice had not been given. That usually means comparing what actually happened to your money with what would have happened had you been advised suitably (or not transferred at all). The difference is your loss. This is why compensation is not the same as "the money I put in" — sometimes it is more (because suitable advice would have grown your money), and sometimes it is less.
What counts as your loss
Depending on the case, your loss can include:
- Lost capital — money that has gone or is trapped in a failed investment.
- Lost growth — the return a suitable investment or your original pension would reasonably have produced.
- Charges and fees — costs you should never have paid, including some adviser or product charges.
- Distress and inconvenience — in some cases a modest, separate award for the upset caused, where appropriate.
Route by route: who calculates it, and the limits
The method is broadly the same across routes — your loss measured against a suitable comparator — but the cap differs.
| Route | How the loss is worked out | Limit |
|---|---|---|
| Financial Ombudsman (FOS) | "Fair compensation" — the position you'd be in but for the unsuitable advice | Up to £455,000 (acts on/after 1 Apr 2019; £205,000 for earlier acts) |
| FSCS (failed firm) | Your assessed loss on the same principle, paid by the scheme | £85,000 per person, per failed firm |
| Court | Damages for the proven loss | No fixed cap |
Where your loss is above the FSCS cap, the balance can sometimes be pursued against any solvent party. Where it exceeds the FOS limit, the Ombudsman can recommend (but not compel) the firm to pay the difference.
Defined benefit transfers: the redress methodology in plain English
Claims about giving up a defined benefit (final salary) pension use a defined methodology. In essence, it values the guaranteed, inflation-protected income you gave up and compares it with what you now have, using set financial assumptions to express that as a single figure today. Because the calculation reflects the value of a lifetime guaranteed income, redress for DB transfers can be substantial — but it is highly sensitive to those assumptions and to your personal circumstances.
SIPP and investment losses: actual value vs a suitable comparator
For mis-sold SIPP and investment cases, the loss is typically the difference between the actual value of your fund (often little or nothing, where an investment has failed) and the value it would have had in a suitable alternative or your original scheme. This comparator approach is why two people who invested the same amount can receive very different awards.
Interest, tax and deductions
- Interest. An award can include interest to reflect being deprived of your money. For complaints referred to the Ombudsman from 1 January 2026, interest is typically calculated using a time-weighted Bank of England base rate plus one percentage point (previously 8% simple).
- Tax. Compensation for a direct financial loss is generally not treated as taxable income, but the position can differ for any interest element or for redress paid into a pension. You should confirm your own tax position; we are not tax advisers.
- Deductions. If you use a No Win No Fee service, a success fee is deducted from compensation that is recovered — full details are set out in your client care letter before you commit. Benefits you have already drawn, or factors that contributed to the loss, can also reduce the figure.
Illustrative worked examples (hypothetical)
These are simplified examples only and not a prediction for any individual case.
- SIPP example: someone transferred £60,000 into a SIPP holding a failed unregulated investment now worth nothing. The loss is assessed against what a suitable investment would have been worth — so the assessed loss could exceed the original £60,000 once lost growth is included, though FSCS payment would be capped at £85,000 per firm.
- DB example: someone who gave up a final salary pension has the value of that lost guaranteed income calculated under the redress method; the resulting figure reflects a lifetime of foregone income, not just contributions paid.
What can reduce your compensation
Common reductions include benefits already taken from the arrangement, amounts already recovered elsewhere, the FSCS per-firm cap, contributory factors, and any agreed success fee. We explain all of this up front so there are no surprises.