The Financial Ombudsman Service (FOS) is set to increase their maximum payout amount by £200k. This could lead to FOS compensation being increased to cover the huge losses experienced by mis-selling victims.
FOS compensation changes
The current maximum payout available to consumers and SMEs is £150k. However, investors regularly place much more than this amount into schemes.
There are around 2,000 complaints each year where the amount of compensation FOS determines is due is above the current award limit. The FOS argued that if firms do not voluntarily pay compensation above the award limit, then complainants could be suffering an aggregate financial harm of around £113m per year.
What could the changes mean?
The Financial Conduct Authority (FCA) has not changed the FOS compensation limit in six years. It has stated that the increase is necessary to meet the needs of consumers and SMEs.
The regulator stated: “The number of these ‘high value’ complaints is relatively low with just over 1% of these upheld. However, there is a risk of very significant financial harm to complainants if they do not receive the full amount of fair compensation the FOS considers is due.
“We consider 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.”
When will the changes come into force?
The increase will only apply to mis-selling complaints where the alleged mis-selling occurs after April 2019.
Mis-selling complaints where the alleged mis-selling occurred before April 2019 but are submitted after April 2019 will see an increase of just £10,000.
Any claims already submitted, or submitted before April 2019, will be bound by the current £150,000 limit.
While we welcome the increase, we’re concerned that it will only apply to mis-selling that occurs after April 2019.
Last year, the 40 highest value self-invested personal pension (Sipp) mis-selling complaints were worth on average £241,000. Based on the current FOS limit, consumers would be almost £100,000 each out of pocket.
We have many clients who have lost more than the maximum payout limit of £150,000 due to mis-selling that has already occurred. The FOS limit means we have to seek compensation for these clients through the courts. This will ensure they can be put back in the position they were before they made their investments.
We believe FOS should go further and increase the limit for historic cases. In the meantime, we will continue to work tirelessly and explore all legal avenues to ensure that anyone who has lost more than £150,000 receives all the compensation they deserve.
If you believe you have been mis-sold a pension or investment, get in touch today. Our team of experts can offer support and advice in getting you the full compensation you deserve.