The Financial Ombudsman Service has confirmed it will reduce the number of free cases available in order to cut its cost base - despite concerns about the proposal.
The Fos also said its cost base for 2022-23 would be smaller than expected - £291.7mn rather than the £293.8m it had forecast.
But this will still be an increase of 18 per cent on the £249.4mn levied for the current year.
The Fos said it expected to fund this through a levy increase of £10m to £106m and cuts to its cost base.
Alongside this, Fos will aim to raise £11m by reducing free cases against firms to pre‑PPI levels from 25 to three and reducing free cases for group firms from 50 to 15.
As part of the consultation, only two companies - an insurer and a consumer group - explicitly supported the proposal to cut free cases.
Some felt they needed more information behind this decision, and to justify such a major change and increase in funding and 20 firms commented on the proposals, with 19 expressing concern.
The Fos said the majority of all other responses were concerned about its implications, especially to the cost burden and pressure on smaller firms, community development financial institutions, and on those who generate the fewest cases.
However, despite the range of feedback on all of the proposals, the Fos said given the scale of the changes set out in its action plan, and the investment required to deliver on that, it has decided to implement the proposals consulted on.
These changes will take effect from April 1, 2022.
The Fos also announced that the voluntary jurisdiction levy, for firms choosing to be covered by the service, will raise £700,000 next year rather than the previously proposed £950,000.
In the consultation paper in December, the Fos said it anticipated dealing with fewer complaints under voluntary jurisdiction in 2022-23, which would lead to it raising a lower overall levy.
In its consultation last year the Fos anticipated keeping the tariff rates the same as last year and estimated it would receive £950,000 from this levy.
But in its plan and budget for 2022-23 published today (March 30) it has now revised this down to £700,000. This is not only a reduction on its proposals - it is a fall from the £760,000 raised this year.
The Fos said the fall in complaints under this regime was due to the introduction of the Financial Conduct Authority’s temporary permissions regime, which came into force on December 31, 2020 due to Brexit.
Nausicaa Delfas, chief executive and chief ombudsman at the Fos, said: “In the last financial year, we took significant steps to put the Financial Ombudsman Service on a better path for the future. We published our action plan, together with our periodic review, and have been driving down our backlog of cases.
“In the next financial year, we will be investing to make a step change in performance, by developing our technologies and implementing our new operating model. The changes we make will help deliver a better service for all our customers and will allow the organisation to become financially sustainable for the future.”
In the consultation, which was open until January 31, 2022, the Fos said it expected to receive approximately 177,000 complaints including 17,600 about investments and pensions, 500 about CMCs and 2,000 about payment protection insurance.
It said it expected to resolve approximately 210,500 complaints including an increase in the number of complaints about investments and pensions to 19,700. It also forecast 600 complaints about CMCs and 5,500 about PPI.
Source: Fos - Plans and Budget 2022-23
Addressing the predicted increase in investment and pension complaints, the Fos said: “Some said younger people may be more likely to complain as awareness of investment opportunities grows through social media.
"As we noted in the consultation, the extent to which cryptocurrencies are brought into regulation is likely to affect the number of complaints we are able to look at."
The Fos also noted that after it launched its plans and budget consultation in December 2021, the FCA announced that it expected to consult in March 2022 on a redress scheme for former members of the British Steel pension scheme who transferred their pension.
It said it was working with FCA to determine the impact of this on its service and the budget for the remainder of this financial year.
“We continue our regular dialogue about the cases we are seeing in this area and what a scheme could look like, and will continue to work closely with the FCA as it develops its plans so that we can respond to any changes which might be needed to our plan and budget within the year.”
In December, Fos published an action plan setting out how it will improve its delivery for customers and provide help to resolve cases more efficiently.
Around the same time, Delfas also told FTAdviser that complaints about CMCs were not a “huge number” in comparison to its overall complaints.
sonia.rach@ft.com
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