The Financial Ombudsman Service has admitted its operating model is “not sustainable” and is looking to reform it.
Fos has published its plans and budget for 2015/16 which includes a 13 per cent reduction in the service’s cost to £220.7m.
Despite the hotly anticipated pension freedoms reforms, Fos is predicting the number of complaints about pensions and investments will remain broadly similar at 16,000.
The bulk of Fos’s workload still relates to payment protection insurance, with an expected 200,000 complaints on this in 2014/15.
However, the number of complaints Fos is receiving on this issue is now beginning to decline.
In its plan Fos said: “We will continue to have a large volume of existing cases to work through, while we continue to receive a high volume, but falling numbers, of new cases.
“The key to dealing effectively with our PPI workload is to build the capacity of our adjudicators so that they can deal with a wide range of cases.”
Fos is expecting to receive 150,000 complaints about PPI in 2015/16.
| New cases | Actual 2013/14 | Forecast 2014/15 | Budget 2015/16 |
| Banking | 57,419 | 66,500 | 74,000 |
| Consumer credit | 7,658 | 9,500 | 11,000 |
| Insurance (not including PPI) | 31,213 | 33,000 | 31,000 |
| Investment and pensions | 15,938 | 16,000 | 16,000 |
| PPI (payment protection insurance) | 399,939 | 200,000 | 150,000 |
| Total | 512,167 | 325,000 | 282,000 |
However because of the large PPI volume, Fos is expecting to make a £50m loss in 2015/16 which will be funded from its reserves.
Fos has admitted this is not sustainable and has said developing a new operating model is a “key priority”.
Despite this the ombudsman, which is funded by compulsory levies on businesses, has said it will once again freeze these charges and the case fee a business has to pay.
Over the summer of 2014 the number of cases relating to packaged bank accounts increased from 50 a week to 500 – and Fos is anticipating receiving 18,000 over the course of 2015/16.
Adviser view
Simon Webster, of Kent-based Facts and Figures, said: “I am still of the belief that the problem for the industry and Fos in general is that anybody putting in a complaint has everything to gain and nothing to lose.
“In my view clients should have to pay a small deposit upfront just to make them realise that there are costs associated with this.”
