In this work, InGaN/GaN Multi-Quantum Wells (MQWs) with strain compensating AlGaN interlayers grown by metalorganic vapour phase epitaxy have been investigated by high resolution X-ray diffraction, transmission electron microscopy and photoluminescence (PL). For different AlGaN strain compensating layer thicknesses varying from 0 to 10.6 nm, a detailed X-ray diffraction analysis shows that the MQW stack become completely strained on GaN along a and c. The compensation is full from an AlGaN layer thickness of 5.2 nm, and this does not change up to the largest one that has been investigated. In this instance, the AlGaN was grown at the same temperature as the GaN barrier, on top of a protective 3 nm GaN. It is found that the crystalline quality of the system is progressively degraded when the thickness of the AlGaN interlayer is increased through strain concentrated domains which randomly form inside the 3 nm GaN low temperature layer. These domains systematically contribute to a local decrease of the QW thickness and most probably to an efficient localisation of carriers. Despite these defects, the PL is highly improved towards the red wavelengths and compares with the reports on ultrathin AlGaN layers where this has been correlated to the improvement of the crystalline quality although with less strain compensation.