FSA proposes "no change" in compensation and Ombudsman payment limits - but consults on specific issues
FSA/PN/138/2005
15 December 2005
The Financial Services Authority today published the findings of its review of the compensation and eligibility limits for the Financial Services Compensation Scheme (FSCS) for the compulsory jurisdiction of the Financial Ombudsman Service (FOS). In a Consultation Paper published today the FSA is recommending no change to the existing limits (see note 2).
The key findings of the review were that:
- most claims or complaints are still well below the current maximum limits;
- there is no evidence that consumer behaviour and market confidence are being significantly affected by current limits;
- FSCS limits significantly exceed EU minimum limits (currently €20,000) for deposits and investments;
- FSCS limits are also generally higher than in other EU member states and other major world economies, with the exception of deposits.
- there is no evidence of significant or widespread consumer detriment, or distortions to consumer behaviour, either now or in the immediate future, that would justify recommending changing the limits.
But the FSA’s work has shown that there is a very wide range of views among stakeholders and the FSA is therefore consulting on some specific issues.
Where applicable, this consultation is being conducted jointly with the Financial Ombudsman Service. The case for increasing the maximum limit for ombudsman awards from the current £100,000 to £200,000 is discussed.
The current limits have been in force since the FSCS and the Financial Ombudsman Service started operating in December 2001, under the Financial Services and Markets Act 2000. The FSA plans to review the compensation and eligibility again at regular intervals.
Notes to editors
- Consultation Paper 05/15 'Review of Compensation Scheme and Ombudsman Service limits and miscellaneous amendments to the Compensation sourcebook' can be found on our website.
- FSCS and Financial Ombudsman Service payment limits:
| FSCS Limits | |
|---|---|
| Investments | 100% of first £30,000 90% of next £20,000 Maximum £48,000 |
| Deposits | 100% of first £2,000 90% of next £33,000 Maximum £31,700 |
| Insurance (compulsory) | Unlimited 100% of claim |
| Insurance (non-compulsory) | Unlimited 100% of first £2,000 90% of remainder |
| Mortgage advice & arranging | 100% of first £30,000 90% of next £20,000 Maximum £48,000 |
Advising & arranging general insurance: |
100% of claim 100% of first £2,000 90% of remainder |
| Financial Ombudsman Service Limit | £100,000 award for all types of business |
- The FSA as regulator is responsible for setting the compensation and eligibility limits that apply to the FSCS and the compulsory jurisdiction of the Financial Ombudsman Service.
- Individuals and small businesses are eligible to make claims to the FSCS and the Financial Ombudsman Service. The eligibility definition of a small business for FSCS claims depends on the type of activity, partly to reflect European directive requirements. For the purpose of complaints to the ombudsman service, a small business is one with a group turnover of less than £1 million. A £1 million limit also applies, in the case of charities, to their annual income, and, in the case of trustees, to the net assets of the trust.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal, and improve its business capability and effectiveness.