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With effect from April 1st the binding award limit for FOS claims will increase from £150,000 to;

  • £160,000 for complaints about acts or omissions prior to 1st April
  • £350,000 for complaints about acts or omissions after 1st April

Concerns were raised in response to Consultation Paper 18/31 that the proposed increase in limits would  lead to increases in premiums, restriction in cover and fewer insurers willing to insure Financial Advisers because;

  • The paper fails to address the right to compensation needs to be balanced against a firm’s right only to be held liable to pay such compensation after a fair hearing and due process
  • The paper fails to balance the competing objectives of consumer protection and access to a competitive financial services market
  • The aim of FOS is to provide a quick, informal and free (for complainants) dispute resolution service to the financial services industry and its powers and processes are specifically designed to meet this aim and it is not intended to provide a forum for all complaints regardless of value. That some complainants have potentially high value complaints does not of itself mean the award limit should be increased.  Separate, objective consideration needs to be given to whether the FOS is a suitable forum for higher value claims
  • The FOS is not obliged to apply the law but can make decisions according to what an Ombudsman considers to be fair and reasonable, FOS final determinations are binding (if accepted by the complainant), enforceable in court and not subject to any form of appeal,  and, perhaps most importantly never conducts hearings in person, has no power to require complainants to provide full disclosure and does not call upon or consider independent expert evidence on complex, technical issues. As such, the FOS process does not provide a rigorous analysis of evidence – certainly when compared to a court process
  • The above does mean that the FOS can provide the quick, informal dispute resolution service it was designed to provide.  However, these same features are singularly unsuitable and inappropriate for dealing with higher value complaints, which are often also more complex.  Fundamentally, it is not fair or reasonable for firms to be held liable for very large amounts of money without the protection of a fully rigorous examination of evidence

On 8th March the FCA announced that the limit would be increased with effect from 1st April without responding to the concerns raised, resulting in firms with existing policies already in place potentially having cover that didn’t comply with the increased limits with effect from 1st  April. This is clearly not an acceptable situation for Collegiate policyholders so we can confirm that with effect from 1st April all active policies will provide a full indemnity for any FOS awards up to the new limits specified in PS19/8, subject to policy terms and conditions.

However, this will not be extended to complaints about Defined Benefit Pension Transfers arranged after 1st April 2019.  If any current Collegiate policyholder wishes to continue arranging  Defined Benefit Pension Transfers after 1st April then we can consider providing cover for the increased FOS limit subject to completion of the pension transfer questionnaire