The Financial Ombudsman Service decided to freeze the minimum payment levy and reduce its overall levy from £106m to £84m, while the case fee was increased from £550 to £650
The Financial Ombudsman Service (FOS) has proposed an increase in the levy and case fees for 2021/22 after warning another freeze of costs would be unsustainable.
Consulting on its strategic plans and budget for 2021/22, FOS said it wants to increase the levy to £106m, from £84m and increase case fees by £100 from £650 to £750.
When the current FOS budget was due for approval by the Financial Conduct Authority in March, the Ombudsman said it had become clear that Covid-19 would have a significant effect on the economy.
It decided to freeze the minimum payment levy and reduce its overall levy from £106m to £84m, using its own reserves to absorb some costs with a smaller proportion of funding coming from the levy instead. The case fee was increased from £550 to £650, however, for the first time since in seven years.
FOS says while this decision to freeze the minimum payment levy was the right one to make, doing so has left it with a budget deficit forecast to be £43.1m, compared to the £18m it would have had in its reserves if it had not acted to support firms.
If the freeze goes on another year, FOS forecasts the move would deplete its reserves by a further £53m in 2021/22. This would leave the Ombudsman with three months’ operating expenditure rather than six months, which was agreed by its stakeholders as a sensible level to maintain.
In its consultation, FOS wrote: This tension presents a very difficult backdrop for our decisions about our proposed funding for 2021/22.
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