PS19/8: Increasing the award limit for the Financial Ombudsman Service

Read PS19/8 (PDF)[2]

We have published new rules that increase the ombudsman service’s award limit to:

• £350,000 for complaints about acts or omissions by firms which took place on or after 1 April 2019

• £160,000 for complaints about acts or omissions by firms which took place before 1 April 2019 and which are referred to the ombudsman service on or after 1 April 2019

Our new rules will also ensure that, from 1 April 2020 onwards, both award limits are automatically adjusted each year in line with inflation, as measured by the Consumer Prices Index (CPI).

For any complaints referred to the ombudsman service before 1 April 2019, the limit will remain at £150,000.

Background

Our changes to the ombudsman service’s award limit will ensure more complainants receive fair compensation when the ombudsman service upholds their complaint against a firm. We estimate there could be up to 500 complaints upheld by the ombudsman service each year where the amount of compensation the service determines is due is above the previous award limit of £150,000.

While the number of these ‘high value’ complaints is relatively small, there was a risk of very significant financial harm to complainants if they did not receive the full amount of compensation the ombudsman service considers due.

Previously, if firms did not voluntarily pay compensation above the award limit then complainants could be suffering an aggregate financial harm of up to £47.6 million per year.

Complaints above the previous award limit typically involve insurance that protects consumers from a significant loss, advice on long‑term investments that provide an income in retirement, or the investments themselves. They also include relatively large commercial loans where the affordability of repayments can have a significant impact on the viability of the business that borrowed the money.

We considered it unlikely that the individuals and businesses who are eligible to complain to the ombudsman service would have the means to pursue firms for unpaid compensation through the courts. 

Who this applies to

This Policy Statement should be read by:

• all firms and other financial businesses covered by the ombudsman service’s Compulsory and Voluntary Jurisdictions

• consumer groups

• financial services and other industry representative bodies

• professional indemnity insurance insurers and brokers

• legal services providers

This Policy Statement will also be of interest to:

• groups who are currently eligible to complain to the ombudsman service (including consumers and micro‑enterprises)

• the small and medium‑sized enterprises, charities, trusts and personal guarantors who will become eligible for the ombudsman service on 1 April 2019, as set out in Policy Statement PS18/21[3]

What you need to do

If your firm is affected by these changes, you should ensure you meet the requirements by 1 April 2019.

We recognise that this is a reasonably short implementation period. However, in October 2018 we published our Consultation Paper CP18/31 which consulted on increasing the award limit on 1 April 2019. This was so the change could come into force at the same time as the extension of the ombudsman service to larger small and medium-sized enterprises, which we considered a logical approach. Therefore, firms should already have been aware that a change to the limit may occur on 1 April 2019. This Policy Statement serves as confirmation of the change.

We advise firms to focus on the changes they will need to have in place on the 1 April 2019. These include:

• updating consumer-facing information about complaint handling procedures
   
• ensuring they are using the most recent version of the ombudsman service’s standard explanatory leaflet[4]
   
• ensuring complaint handling staff are aware of the increased limits