Financial Ombudsman increases maximum compensation to £375,000

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The Financial Ombudsman Service (FOS) has received permission from the Financial Conduct Authority (FCA) to increase its maximum compensation pay-out to £375,000.

The award limit is the maximum the FOS can order a financial services business to pay if it upholds a complaint against a firm. It is an increase in £20,000 over the current largest limit of £355,000.

The FOS controversially increased its compensation limit from £150,000 to £350,000 in 2019 after it took on handling complaints from SME businesses (See Brunel News December 2018). At the time the FCA said that awards above the limit typically related to complaints about insurance, retirement income or large commercial loans.

The new maximum limit will apply to complaints made from 1 April 2022 about mistakes made by firms since 1 April 2019. The limit applicable to errors and omissions made prior to 1 April 2019 has also been increased to £170,000, provided that the complaint is made after 01 April 2022. Lower compensation limits will still apply to complaints made before 1 April this year.

James Burgoyne of Brunel Professions said: “This increase will put further pressure on the professional indemnity market for financial advisers as insurers will face bigger pay-outs if the FOS makes an award against one of their clients. Advisers should make sure their PI insurance covers the changes as any shortfall will have to be covered from the firm’s own resources.”

The FOS has published its announcement and an ‘Understanding Compensation’ page on its website. A report about the change has been published by FT Adviser.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK. Click here to get a quote or call 0345 450 1074 to speak to a broker.

 

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