The Financial Ombudsman Service (FOS) has proposed raising its budget by nearly £90 million from £191 million in 2012 to £280 million for 2013 due to the volume of payment protection insurance (PPI) cases it expects.
In its proposed budget for 2013/14, the FOS said that it expected the amount of PPI work to double this year and has suggested raising its income budget by £89 million from the one for 2012/13.
It has also proposed to raise the standard case fees for individual firms from £500 to £550 and upping the total amount it levies firms from £17.7 million to £23 million.
The FOS, headed by chief executive Natalie Ceeney (pictured), said that it ended the current financial year with a ‘significant deficit’ but hopes to break even by the end of the 2013/14 year.
Under its existing funding arrangements, the Ombudsman said it was not certain as to when it will actually receive its income, which comes from standard case fees that are paid only once a case is finally settled.
Under its reserves policy, it needs to maintain financial reserves equivalent to three months’ operating cost, which is currently £25 million but which it claimed needs to be raised to £75 million.
The FOS has also decided to proceed with the new ‘group-account fee’ for the UK’s largest banking groups, after consulting on it in 2012. The fee would be determined in advance on the basis of an overall proportion of expected work from each. This would then apply to the four banking groups that together account for around 60% of the FOS’s caseload, it said.
This would also mean that t majority of smaller businesses would no longer pay any case fees at all as the number of free cases for each business would go up from three to 25, it said.
The FOS said that its last budget was based on the assumption that it would receive 120,000 new cases other than PPI, and 165,000 new PPI cases. However, by the end of November 2012 it had received 54% more cases than it had forecasted.
The number of cases relating to investments, including pensions and mortgage endowments, increased by 31% compared with 2011/2012.