Consumers could manipulate the outcome and awards they receive from the ombudsman by choosing to bring their claim to the right one, an expert has warned.
Currently there are two ombudsman services dealing with financial services complaints, the Financial Ombudsman service and the Pensions Ombudsman.
The remits of those two overlap, although they did clarify the scope of their respective remits on pension complaints in an agreement between them in late 2017.
But in the latest review of the Pensions Ombudsman, published by the Department for Work and Pensions today (August 27), lead reviewer Hazel Hobbs urged the organisation to improve its relationship with the Fos and develop a “collaborative process to reduce the potential for customer confusion and duplication of efforts”.
The ombudsmen's remit overlaps mainly due to the relationship between pensions and investments - TPO deals with matters which concern the administration and management of occupational and personal pension schemes, including pension transfers, while the Fos deals predominantly with advice on individual pensions.
However, Fos can also consider complaints about the administration of personal pensions and group personal pensions, which also falls under TPO’s reach.
Ms Hobbs noted while customers were able to take advantage of the overlap well-resourced pension schemes were too, as they could signpost customers to the organisation they thought more likely to rule in their favour.
“This undermines fair and equal access for citizens to obtain justice,” she noted.
Ms Hobbs explained TPO and the Fos may reasonably reach different conclusions on the same case due to the difference in the underlying legislative frameworks.
While TPO decides complaints on the basis of what a court would decide, the Fos makes determinations based on what is considered ‘fair and reasonable’ taking into account relevant law and regulations.
There is another notable difference between the two: while the Fos can award up to £350,000 on complaints brought after April 2019, TPO has no financial limit on the value it can award.
The scale of the issue was difficult to ascertain, Ms Hobbs noted, due to a lack of comparable data between cases from the two organisations.
She said: “The fact that a case could get a different answer depending on where a complainant is first directed is not satisfactory and could become increasingly unsustainable given the increased ability of consumers to compare their experiences through social media.”
However, the review concluded the actual overlap between the two bodies was relatively small, particularly from the viewpoint of the Fos: pensions products made up only 4 per cent - or 7,449 complaints - of the 388,392 new complaints the organisation handled in 2018/19, and only a subset of these concerned maladministration rather than advice.
The review also found confusion among consumers about which entity they should bring their complaint to, and some duplication of efforts, since some cases are begun at one organisation before it is decided they would be better handled by the other.
Ms Hobbs recommended TPO increased its engagement with the Money and Pensions Service and the pensions industry “to ensure clarity on where customers should be directed, limiting the potential for customers to be transferred between organisations”.
She also advocated that both entities name contact arrangements to discuss specific cases where the “complainant may benefit from having their case considered in one or other organisation, or to ascertain and share the facts on cases that require both ombudsmen to either mediate or reach a formal determination”.
Finally, she is recommending that both ombudsmen work with stakeholders and providers to “minimise misdirection of customers and to disseminate feedback and learning from cases designed to raise standards”.
Alan Chan, director and chartered financial planner at IFS Wealth and Pensions, said: "Overlaps like this are inevitable.
"It’s not ideal but it appears the potential for abuse is likely to be very small. Still, clarity would be welcome so that consumers are directed to the right ombudsman service and are treated fairly."
maria.espadinha@ft.com
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