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Fos raises levy by 5%, keeps case fees frozen

Fos raises levy by 5%, keeps case fees frozen

The Financial Ombudsman Service’s industry levy is set to rise by £1.2m in the coming financial year, but case fees will remain frozen at £550 for the fourth time in a row.

In its plan and budget, published 22 March, Fos said its industry-wide levy would increase from £23.3m to £24.5m.

Fos attributed the levy rise to the Financial Conduct Authority taking responsibility for consumer credit from the Office of Fair Trading.

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This means an increased number of firms will pay the levy, although the amounts levied on individual firms should remain the same, Fos said, making the levy effectively frozen this year.

The consumer redress body’s planned operating budget will also go up from £223.2m to £226.5m

Elsewhere, the budget stated that the total number of consumer enquiries faced by Fos in 2016/17 was expected to stay broadly flat at 1.7m, with a forecast of 15,000 investments and pensions complaints.

In terms of the pension freedoms driving consumer enquiries, this was also expected to remain flat, as Fos reported only witnessing a “relatively small” total relating to delays and administrative problems from pension providers and issues around getting advice.

As part of its annual industry consultation on its plans and budget, Fos asked stakeholders about its proposals to freeze the levy, freeze the standard case fee, maintain the number of ‘free’ cases at 25, and retain the current group-account fee arrangements.

It noted the majority of respondents agreed Fos should explore the current flat-rate case fee arrangement and wanted opportunities to engage on this.

“Several highlighted the complexity of cases or early resolution as factors of relevance to future discussions about the case fee structure,” read the document. “Others expressed some value in the simplicity of a single price structure, and warned of the risk of unintended perverse incentives.”

It added that in light of this feedback, “we agree that given the uncertainties ahead, we should use our reserves to further develop our service”.

Adviser view:

Adrian Murphy, a partner at Glasgow-based Murphy Wealth, commented: “It’s pretty disappointing that our levy is increasing again despite all of the press around FAMR. We are still in the situation where poor practice is protected by good practice.

“This continues to be an unsustainable position.”