Financial Ombudsman Service  

Fos ends year on surplus

Fos ends year on surplus

The Financial Ombudsman Service has ended the 2018/19 tax year on a budget surplus, having received fewer than expected PPI claims. 

According to its financial report, published today (July 15), the overall spend for the year was £270m, a total of £20m below budget, while people costs came to £9m under budget at £226m. 

The Fos said this was the result of a "re-profiling of our workforce" in relation to PPI where the headcount was 400 lower for the year. 

It stated: "In PPI, as we head toward the FCA’s complaints deadline, we’ve continued our policy of increasing the use of our contractor workforce, rather than recruiting permanent headcount.

"As at 31 March, 60 per cent of our case-handlers in our areas of mass claims were contractors (51 per cent in 2017/2018)."

But the expected scale down of the service also means it won't be able to rely on case fees for its funding to the same extent as before.

In a funding consultation in July the ombudsman proposed a funding model with a 50:50 split between case fees and the levy, a move from its current split of 85 per cent coming from case fees and 15 per cent from the levy. 

In 2018/19, the Fos’ levy was £24m, charged and collected by the FCA based on the amount of work expected, for the coming year it will be £45m. The standard case fee is £550 payable after 25 free cases.

As at the end of March, the Ombudsman Service had combined reserves of £188.9m and deferred income of £0.3m. It recorded a cash balance of £191m. 

Throughout the period, the Fos made additional cost savings in areas such as property.

In February 2018, it exited one property in its entirety and has since released one floor in the main building, Exchange Tower on London's Isle of Dogs, and given notice to exit another. 

According to the report, these moves generated savings of £2.5m in the 2018/19 tax year, with projected future savings of £5m. 

The Ombudsman also made a £176,000 saving through the re-tender of some software licensing requirements and an additional £50,000 on the build of its website. 

During the period the ‘unit cost’ in relation to the total number of complaints the service resolves during the year, increased to £713, from £608 a year earlier. 

The Fos attributed this to the reduction in PPI complaints handled and has forecast a unit cost of £650 for the 2019/20 tax year for the same reasons. 

It stated: "Our forecasts and budgets remain subject to uncertainty about the scale of any future rise in PPI complaints, and the degree of complexity we’ll see.

"As we explained in our plans for the year ahead our ability to deal effectively with PPI complaints won’t just be a question of our own internal plans – but will also be influenced by the way businesses and claims management companies handle complaints themselves, and whether they work with us cooperatively when their customers refer complaints to us."