""In my experience, ATC may say something along the lines of: "Traffic 11 o'clock, 3 miles, indicating 2400 feet unverified".I take this to mean they are not in comms with the other aircraft and are merely reading off his Mode C indication. All encoding altimeters use 1013 as the datum so if necessary I might dial in 1013 mb on my second altimeter to check how his altitude compares to my own. Not difficult and is normally enough to help spot and ensure separation from him.""
It is pointless to dial in 1013. Below the Transition Altitude the Mode C is automatically converted from that encoded on 1013 to altitude, verified or not. Remain on the controller's QNH. That is the setting fed into the radar.