FSA To Maintain Current Compensation And Ombudsman Payment Limits

by Robin Pilgrim, LawAndTax-News.com, London

19 December 2005

The UK's Financial Services Authority on Thursday 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 last week, the FSA recommended that no changes be made to the existing limits.

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 EUR20,000) 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. However, 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.
  

The consultation is being conducted jointly with the Financial Ombudsman Service, and the case for increasing the maximum limit for ombudsman awards from the current GBP100,000 to GBP200,000 is discussed in the paper.

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.

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