The Financial Ombudsman Service (FOS) is holding its fees for advisers and intermediaries at the same level for the next year despite a near-100,000 surge in cases this year.
Complaint cases submitted to the ombudsman in 2024-25 are on track to hit 291,000, up from 199,000 last year, driven by motor finance commission and claims management companies (CMCs).
Cases received are tracking 38% ahead of the originally forecast figure of 210,000.
However, despite this the FOS is expecting to receive 240,000 cases in 2025-26, around 18% below the figure for this year, and plans to solve 270,000 cases to help tackle the unexpected backlog.
As a result it is proposing a budget of £292m, up £38m from the expected £254m that it will cost to run the organisation this year.
There will be £3m raised from a case fee to be introduced for CMCs and other professional representatives.
Commission complaints
The FOS said it was still witing for guidance from the Financial Conduct Authority (FCA) and courts on how to address complaints related to discretionary commission arrangements tied to motor finance.
Last month at the Protection Review conference Association of Mortgage Intermediaries (AMI) chief executive Robert Sinclair said the decisions in court cases related to this could “drive a coach and horses” through commission arrangements across financial services.
Overall, insurance cases submitted are expected to be largely unchanged at around 43,900 in 2024-25 with motor insurance the largest source of complaints.
“We expect complaints about insurance to remain relatively stable,” the FOS said.
“We expect complaints about motor insurance to remain high due to higher costs and supply challenges around parts and labour.”
Levies unchanged
The FOS is forecasting an operating cost of £281.7m – an increase of £36.3m on 2024-25 – primarily for additional resource to deliver 45,000 more complaints than this year.
And it is budgeting a reduction of 4% in cost per case to £1,044 in 2025-26, down from £1,082 forecast for 2024-25.
This includes an additional £3m for the increase in employers’ National Insurance (NI) announced by government in the last budget, along with the rise in the National Living Wage.
The FOS said this cost would be higher if it were not for the operational efficiencies and performance management improvements delivered by its transformation.
It has also sought not to pass on additional costs to the industry for another year with there being no rise in compulsory jurisdiction or voluntary jurisdiction levies or case fees for respondents.
“Last financial year we reduced our prices, reflected in both the levy and case fee,” the FOS said.
“We are pleased to be setting out a proposed budget which keeps prices at this reduced level, with no inflationary increase applied.
“This is equivalent to a benefit of £70m to industry compared to 2023/24 prices. This is the second year in a row that we have been able to keep our cost to industry at a lower level.”
