What are we to make of the Financial Ombudsman?


The Financial Ombudsman’s annual report – published yesterday – shows strong demand for its services. But the perception of what FOS does seems to be wider than it should be.

Many people use FAS as a money advice service , as they should the Money Advice Service. I’m not sure why that is, I suspect from reading the comments sections of Money Savings Expert that people divide between the genuinely hapless and those sniffing around for a DIY compensation claim.

The villains of the piece, in terms of complaints handled, are the banks , followed by the insurers. The big ticket items in terms of FOS’ time are payday loans and PPI. The consumer protections that have come, have come too late for many, most of the complaints relate to the period when consumers were most vulnerable.

A high proportion of the claims on these banking matters are not upheld.

But claims against insurers and SIPP providers, though small in numbers are far more likely to be successful (63% against 43% overall). I suspect that personal pensions are a regulated in a more mature way with clearer rules and a more obvious definition of transgression.

I was struck by the very small numbers of claims in the pension sector (maybe in part because FOS only covers contract based plans – not occupational schemes – which include the new master trusts).

Complaints about self invested personal pensions (Sipp), and small self-administered schemes

Complaints about personal pensions were up a fifth from 1985 to 2377 (SSAS), rose from 1174 to 1574 over the year.

The upward trend in pension claims could suggest a more litigious public, a less honest advisory sector or the increase in financial banana skins occasioned by the Pension Freedoms. I have no reason to suppose that IFAs are becoming less honest or competent, ambulance chasing may be a factor but I suspect the capacity for people to get it wrong is the biggest factor.

To a large extent, you get things wrong either because you screw up your investment or you screw up your tax. IFAs are increasingly about stopping people screwing up, that is because so much more wealth is now investable and not tied up in defined benefits,

Interestingly, the ONS told me last week that they consider annuities – defined benefit schemes.

The price of freedom, as we all known, is paid by those who mess up. FOS has a delicate task in supporting those who have genuinely been mistreated while not pandering to those who are “trying it on”.

I’d be especially interested in the views of the IFAs who read this blog, as to how well they think FOS is doing,


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to What are we to make of the Financial Ombudsman?

  1. John Mather says:

    Henry on balance FOS does a very good job but then your analysis starts with the assumption that the rules they work under are well constructed. Consider the levy on Surviving IFAs, the honest, compliant, one might say over cautious, certainly the ones in step with regulators. The IFA responsible for a claim may well be long gone yet the survivors pay the levy. Where do the fines for systemic failures go? Not into the compensation pot.

    Prior to 2010 it was common to use Jersey and Guernsey listed structures. These became known as Unregulated Collectives. All of them were labelled “toxic” in the autumn of 2010 in reality most were perfectly good investments but the sheds on far flung beaches took the headlines. No doubt film schemes, endorsed by Ministers, will cause a flood of claims from “Retail Investor” football stars sold to them by their commission hungry managing agents

    The effect has been to increase costs of set up making the barriers to entry much higher and removal of innovation. Placing these good investment with most SIPP providers is now difficult as capital adequacy rules bite legacy holdings, effectively retrospective legislation.

    Then there is the one way ticket for redress. The dishonest claimant or with selective amnesia has no fear of loss if a pack of lies, often reported in trade press, is shown to be false. One of the scale pans of blind justice has been stolen by these uneven rules. When Law and Justice are strangers democracy is threatened

    Had you noticed in the reshuffle Farage is the new Minister of Truth

  2. Peter Beattie says:

    My experience as a pensioner of the last century is that Ombudsmen have little affect if their ‘recommendations’ conflict with our ‘Sovereign Parliament’ who seem to be able to block anything they do not like provided the government have a majority. This includes pensioners ‘rights’ (apparently we do not have any!) now called ‘benefits! Also, reports from Ombudsmen are treated as ‘advisory’ so no teeth there! Courts are ignored and judicial reviews have little effect! You cannot expect that any elderly person can afford to take civil action or have its hassle in the shades of their lives!

  3. Brian Gannon says:

    Great points John, there is an imbalance whereby claims are so easy to make for consumers that have been mistreated that there is then a whole load of freeloaders getting on the same bus who don’t have to pay the fare for their bogus claims. That is not the fault of the FOS, it is the fault of the rulemakers. I get that hard done by people must have the chance to have their claims heard without barriers being put in the way, but it seems to me that the human rights of advisers are being abused on the altar of “the customer is always right”. No win no fee lawyers are not scum but such payment systems do not aid the concept of impartial advice. Is that not why commission was abolished? So far I have not had a claim against me made to the FOS so I cannot pass first hand judgement on how they treat consumers or advisers but I do feel that the current financing system is wrong. Why do the innocent survivors pay for the guilty perpetrators who have absconded?

    • Phil Castle says:

      I pretty much agree with Brian n this Henry. I haven’t had any complaints that needed to go to the FOS (I had one via a solicitor which was rebutted by the recordings of the meetings rather than written documents and hence was never taken to teh FOS by the consumer as the solicitor the client had used realised they had made false claims).
      As to hwo good a job the FOS does, I read quite a few FOS decisions as they are published on their website and they are often misrepresented by the press such that we IFAs get on our high horses and slag off the FOS (often unfairly). Of the FOS desisions I have a read I would say a good 80% I agree with the FOS decision (as often as not AGAINST the adviser)….. but the 20% I disagree with are often unfathoomable as to how they have arrived at the decision and it is that which annoys me asthere is no appeal.

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