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The Financial Services Authority confirmed today that the compensation and eligibility limits for the Financial Services Compensation Scheme (FSCS) and for the compulsory jurisdiction of the Financial Ombudsman Service would remain at their existing levels.
This follows a consultation by the FSA in which the majority of respondents supported the FSA's proposal for no change to the limits. The recommendation was based on a review carried out during 2005 which found 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.
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 limits again in 2009.
Background
- Policy Statement 06/4 (Review of Compensation Scheme and Ombudsman Service limits and miscellaneous amendments to the Compensation sourcebook) can be found on the FSA website.
- Consultation Paper 05/15 (Review of Compensation Scheme and Ombudsman Service limits and miscellaneous amendments to the Compensation sourcebook) can be found on the FSA website.
- 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.
- 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) and advising & arranging general insurance: | Unlimited 100% of claim |
| Insurance (non-compulsory) and advising & arranging general insurance | 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 |
| Financial Ombudsman Service Limit | |
| £100,000 award for all types of business | |
- 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. 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.
