Are advisers right to be complaining about the proposed rise in the Financial Ombudsman Service’s award limit?
Currently the limit for compensation that can be awarded in successful cases is £150,000 but, according to the Fos, it is proposing to increase this by 133 per cent.
From April 1 2019 – perhaps an inauspicious date, given it will be All Fools’ Day – there will now be compensation awards of £350,000 for complaints about acts or omissions by companies made after that date.
There is also a proposal to automatically adjust award limits in line with the CPI every year on April 1 thereafter.
Any complaints referred to the ombudsman service before that date will remain at £150,000 for upheld cases.
While this does make sense when considering the high losses accrued by some people who have been scammed out of their hard-earned pensions, or for those who took advice that proved to be misleading, causing significant investment loss, it seems a strange move by Fos to apply this to all cases.
This effectively shines a green light to claims management companies and ambulance chasers to go for gold. Why wouldn’t you pursue a complaint, no matter how tenuous, with the Fos, if you thought you could get a high level of redress?
CMCs must be rubbing their hands together with glee, anticipating a raft of pension transfer complaints that could get the client £350,000 – and get the CMC a good 30 per cent to 40 per cent at least of that overall compensation.
Meanwhile, advisers will find their professional indemnity premiums will rise again, while the greater capital adequacy requirements that will inevitably follow will squeeze out the smaller players.
While the dodgy few will disappear, leaving the rest of the advisers footing the Financial Services Compensation Scheme levy.
The joke will definitely be on us on April 1 2019.
Simoney Kyriakou is deputy editor of Financial Adviser