Financial Ombudsman Service  

Experts criticise new Fos limit

This, it said, would leave at least 1,500 “lower risk” companies in the DB transfer market, which it said was sufficient to meet demand.

The FCA said it expected increases in the cost of advice to be “moderate” and would be proportionate to the increased level of consumer protection the higher limit would provide.

Flawed process

Experts say the entire awards process is inconsistent, unbalanced, and needs a rethink beyond just an extension of the payout. 

Claims made through the Fos are free, with no risk to the claimant. The person claimed against cannot counterclaim or gain recompense for malicious and unfounded accusations, which also heightens risk. 

“There is no right of appeal against a Fos decision, save for a judicial review, which is not an appeal on the facts of the case, only an assessment of if Fos acted reasonably in exercising its powers,” says Caroline Bradley, group risk and regulatory director at Tenet Group.

“Fos takes an inquisitive view, this may include assuming uncorroborated facts are, on balance, correct,” she adds.

Advisers should check their PI cover to ensure it covers the full £350,000 limit, Ms Bradley adds. “If not, there is a requirement for directly authorised firms to hold higher capital.”

Skewed cost benefit

The new limit will apply to complaints about acts or omissions by firms that took place on or after April 1 2019, the FCA has said. There will be a £160,000 limit on complaints raised before then, but which do not get referred until after that date.

The previous increase in Fos limits was in 2012 when the award ceiling rose from £100,000 to £150,000.

Initially, the FCA calculated around 2,000 people each year are entitled to more than the £150,000 limit, which was one of the main drivers for change. However, this sum was later revised down to 500 people in the final consultation response.

“You can see the argument that if you are down £350,000, the arbitrary limit isn’t fair,” says Sir Steve Webb, director of policy at Royal London. “But ultimately, far fewer people will actually benefit than the FCA intended, and there really needs to be some proportionality.”

He explains if a client has lost a sum in the region of £250,000, they still have the option of pursuing the matter in court, which may be a more suitable approach for such sums.

“At some point you must say the claim is so big and serious it should really be pursued in court,” says Mr Walkling.

“I can understand the need to raise it after so many years, but it is so dramatic; if it was going up to £200,000 is one thing, but this is a significant increase. Perhaps claims at that level should really be decided in court.”