FCA announces increase in FOS award limit

The Financial Conduct Authority (FCA) has announced that the Financial Ombudsman Service (FOS) will soon be able to require financial services firms to pay significantly more compensation to consumers and businesses.

From 1 April, the current £150,000 limit will increase to £350,000 for complaints about actions by firms on or after that date. For complaints about actions before 1 April that are referred to the Financial Ombudsman Service after that date, the limit will rise to £160,000.

The FCA has also confirmed that both award limits will be automatically adjusted every year to ensure they keep pace with inflation.

The new award limit will come into force at the same time as the extension of the service to larger small and medium-sized enterprises (SMEs). These are firms with fewer than 50 employees, annual turnover of under £6.5 million and an annual balance sheet total of under £5 million. An additional 210,000 SMEs will be able to complain to the Financial Ombudsman Service.

Andrew Bailey, Chief Executive of the FCA, said “Consumers and small businesses struggle with the cost and time needed to take firms to court, so it is essential they can receive fair compensation from the Financial Ombudsman Service when things go wrong.

‘We have listened carefully to the feedback we have received and believe our approach is right and will bring benefits to both the consumers and micro-enterprises currently eligible for the ombudsman service and the small businesses who will become eligible in April.”

Charlotte Jackson, Head of Pensions Guidance Services at the Single Financial Guidance Body said “The increase to the Financial Ombudsman Service (FOS) award limit means that from April consumers will have access to a higher level of compensation from financial services firms when a complaint is upheld. This will give added protection and assurance to consumers when using a regulated financial adviser, should things go wrong. This will be particularly important for people looking to transfer from a defined benefit scheme.”

Royal London Director of Policy, Steve Webb said “The FCA has been forced to admit that it got its numbers wrong and that just 500 people a year might benefit from this change.   But the risk is that the insurance which advisers are obliged to buy will more than double in price and could drive up to a thousand firms out of the pension transfer advice market altogether.  There is already clear evidence that PI insurers have been hiking premiums in anticipation of this policy change.  Yet the FCA is pressing on regardless.  This is a shocking decision.  If far more members of the public are unable to access advice then this will be counter-productive and consumers will lose out as a result.”