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Pensions Management Institute annual dinner

by Tony King, lead ombudsman for pensions and securities

London, 8 February 2006

Good evening ladies and gentlemen. Let me start by thanking you for inviting me to speak this evening.

In deciding what to say tonight I have taken my cue from a degree of relative existential certainty. That is to say, I know that I am not Gordon Brown. (I know that because I am not wearing a lounge suit.) As it happens, I also know that I am not a Revenue and Customs official, Lord Turner, a representative of a trade body or anything to do with the Department for Work and Pensions.

What I choose to infer from the fact that I am not them, but (to quote Popeye) "Iyam what Iyam", is that - with no disrespect at all to the people aforementioned - you may think you have suffered enough. I suspect that, despite the fact that you appear this evening to be in rude health and excellent spirits, that is a mere mask, worn for the sake of keeping up appearances.

No, in truth, many of you are exhausted by nights without slumber, tossing and turning in contemplation of "A-Day", relieved perhaps by eventual sleep following a nocturnal review of the middle chapters of the second report of the Pensions Commission - but even then rudely awakened by the thought that, rather than sell your extensive wine collection to your SIPP, you will have to let your family drink it.

So I can, I hope, assume your approval when I tell you that tonight I do not propose to talk about simplification, time bombs, State versus private provision or anything of that sort. Apart from other good reasons (and this is something I shall return to) I am an ombudsman - not an adviser, nor a policy maker, nor a lobbyist. And so, quite inappropriately adopting Wittgenstein's "Whereof one cannot speak, thereof one must be silent", I decided that this evening I would talk, briefly, about being an ombudsman - basically because I can.

A useful starting point seems to me to be to consider the question "what are ombudsmen for?" You will note I have deliberately not suggested the question "what are ombudsmen good for", since that positively demands from you Edwin Starr's response to the same question about war - "absolutely nuthin'" (possibly with a few "Good God Yaws" thrown in from the back of the room for good measure). No. "What are ombudsmen for?" is the question.

The answer is not straightforward, because not all ombudsmen are "for" the same thing. It is pretty difficult to lump, say, the UK Estate Agents Ombudsman together with some of the national ombudsmen in developing countries. Estate agents may have their faults, but they rarely indulge in torture and the other human rights abuses that some of those other ombudsmen may have to deal with. Closer to home, the Northern Ireland Police Ombudsman has a job which can lead her into very difficult waters. Given the choice of dealing with the consequences of pension fund withdrawal or the consequences of troop withdrawal, I know which one of us has the easier ride.

In fact the word "ombudsman" has been helpful (or unhelpful, if you choose to think that way) in allowing a broad range of different functionaries to shelter under the same title. We took the word from Sweden in the 1960s - at about the same time as we adopted the Volvo. Later, and with perhaps more mixed results, we borrowed Sven-Goran Eriksson.

To the Swedes, the word means a commissioner, agent or representative. To English speakers it would mean "absolutely nuthin'" - if it weren't for the context given by the offices that use it. And both here and elsewhere in the world, not all ombudsmen are actually called "ombudsmen" at all.

But there is a common thread between the differing bodies - a more or less unifying principle. Ombudsmen offer justice in circumstances where the ordinary person can be seen to be at some sort of disadvantage. For example, where there is an imbalance of power between the individual and the State, or between consumers and industry - or between humans and estate agents.

And perhaps as far as UK ombudsmen are concerned, we can tighten the definition and say that they are free, publicly recognisable, out-of-court injustice remediation and complaint resolution services for citizens.

Of course, my experience is very broadly in the "consumer versus corporate entity" sphere of ombudsman activity and that is what I am going to restrict myself to from here on in. The fact that the UK has ombudsmen at all is broadly thanks to a bit of absurd post war mistreatment by the Ministry of Defence of some farmland (and more importantly the farmer). But for the fact that there are private sector ombudsmen, you must applaud, or blame, the insurance industry. It is sometimes forgotten that, starting twenty-five years ago, long before regulation as we know it was a twinkle in a ministerial eye, the financial services sector began to create its own ombudsmen. So it must have thought that ombudsmen were "for" something.

I don't think that anyone would deny that there was a great deal of enlightened self-interest in that original decision. I am sure that the insurance industry hoped that an effective dispute resolution service would encourage consumer confidence. It would also (as a private service) take disputes away from the public eye. And instead of individual firms having to deal with the most persistent and awkward customers, they could be passed on to the ombudsman.

Obviously independence is the key. I expect that when the industry established its own ombudsmen all that time ago there was a hope that they wouldn't be too independent. But now the independence has, for some of us, statutory backing.

We are, of course, an alternative to the Courts - knowing that much of the point of being an alternative is to be more accessible, inexpensive and relatively quick (we are sometimes better at the first two than the third). One of the ways that we achieve those aims is by having arrived at a way of doing things which differs greatly from Court procedure. It must be right that many disputes simply do not merit the elaborate process of preparing every possible item of evidence and argument - varying from immediately relevant to tangentially, if at all, relevant - and reiterating them at length in a public hearing.

The alternative, though, of an informal inquisitorial process, with hearings the exception rather than the rule, is not something that those who are more familiar with formal litigation are always entirely comfortable with.

But informality ought to be in the interests of both sides equally. An informal approach allows us to engage with the dispute in ways that Courts cannot. And a mediated solution, where possible, is less likely to sour relationships. Over 90% of the 90,000 or so complaints that the Financial Ombudsman Service dealt with last year did not need a formal decision from me or one of my colleagues.

Although resolving disputes is our primary role, ombudsmen have traditionally made a broader contribution to the areas in which they work. I alluded earlier to the aim that creating an ombudsman would increase consumer confidence. Ombudsmen are well positioned to help raise standards, reduce complaints overall and improve service delivery. But doing those things sometimes blurs boundaries. So perhaps it is worth considering what lies beyond those boundaries - what ombudsmen are not for.

First (and I hinted at this earlier) ombudsman are not much use when it comes to setting policy. Now I don't know what colour is the opposite of rose-tinted - and I don't particularly want to speculate about it - but whatever it may be, we wear spectacles of that hue. We see a world full of wretched individuals who feel that they have not received what they deserved - and organisations that are convinced that those same individuals are avaricious ne'er-do-wells in search of easy and unjustified compensation. I exaggerate, of course, but the point is that our viewpoint does not give us a representative picture. We can tell policymakers what we see - but to build policy around that alone would be pretty dangerous.

So when a decision has to be made about whether to evict celebrity final salary schemes from the big brother pensions house and leave in the almost unknown National Pensions Savings Scheme, ombudsmen should have no greater influence than anyone else. (And by the way, when writing that sentence, I briefly contemplated a topsy-turvy world in which as many people were actively involved in their pensions as they were in the fate of a few celebrities of whom I have only half heard ... But then I woke up to reality TV.)

Second, ombudsmen make poor regulators. In fact we just aren't regulators, and many of us visibly bridle when anyone calls us that. But there are times when we look a bit like regulators.

Ombudsmen make decisions in individual cases - just as the Courts do. We do not make prescriptive rulings about future behaviour. But people want to know how to deal with disputes before they reach us. They want to know if there is a real cause for complaint - and what an appropriate remedy might be. So they naturally look to draw wider conclusions from the individual case.

These days regulators increasingly aspire to risk and principles-based regulation. But that means there will be more interpretation necessary - applying principles to actual circumstances - and more filling in around the regulations. So we will perhaps have to live with the accusation that we create regulation that is, to use a current phrase, "alternatively secured" - if not "unsecured".

And Ombudsmen blur the lines too. Acting entirely against our selfish interests (quite characteristically, we would say), we want to reduce the number of cases that come to us. We also want to make sure that we are as consistent as possible. So we explain what our position is in typical cases, both for external and internal consumption. Guidance about avoiding complaints can begin to look like regulation in disguise.

The final thing that ombudsmen are not necessarily best suited to is correcting systemic failures (although we can be quite useful for identifying them). The examples of the Pensions Review, the free-standing AVC review and, more recently, mortgage endowments have not been particularly comfortable experiences for anyone involved. Purely selfishly, mortgage endowments meant that my organisation has had to cope with trebling in size over a very short time. We've managed it - but in the unfortunate event of a "next time", whether in financial services or some other industry, one might want to look quite hard at alternative approaches, though in the end there are not that many tools in the box to choose from.

So that's what ombudsmen are for - and not for. The remaining question is do we need them?

Obviously my answer is "yes" - well I would say that wouldn't I. But if usage is a measure of usefulness then, with my own office receiving over 100,000 complaints a year at the moment, it seems that the public thinks it knows what we are "for". We know that the industry relies on us as well (too much so sometimes, since there's a risk that we can deal with complaints that the industry ought to more cheaply than they can - which is not the point!).

Although earlier on I talked of ombudsmen as alternatives to the Courts, of course almost none of the cases that go to ombudsman would actually reach the Courts. So in practice, we are the alternative to nothing - to an unresolved dispute - which cannot be good for either side.

There's a tradition in this kind of speech of taking a minute for crystal ball gazing by way of conclusion.

As someone once said, "Prediction is very difficult, especially about the future". But I'll risk it.

First, existing ombudsmen will perhaps give some thought to how they do their work. As technology changes, is dealing with individual cases off the papers, investigating in writing, always the best way to do it? The original model of a single ombudsman handing down judgment from on high - sometimes about as accessible and welcoming as King Kong on Skull Island - has already changed. Nowadays a pensions-related complaint might be dealt with by one of six or seven ombudsmen - two in the Pensions Ombudsman's Office and five in mine. (There are, in fact, about thirty ombudsmen in my organisation with the necessary statutory powers - but the rest are too busy elsewhere!) But larger organisations with a less obvious individual source of what might be called "ombudsprudence" bring new challenges.

And in looking at ourselves and our processes, we obviously need to engage with, and listen to, our users, stakeholders and partners.

Continuing to look to the future, it seems that there may well be yet more of us. Ofgem has already proposed an ombudsman for the markets that it regulates, and a recent DTI consultation paper discusses introducing an ombudsman, or ombudsmen, for all regulated industries.

So the imported ombudsman concept will certainly last longer than Sven Goran Erikson (not particularly difficult, that) and than a Volvo (which is slightly harder). And perhaps in the not too far distant future there will no longer be any need to discuss what ombudsman are "for" and where and whether they should exist - any more than we seriously discuss whether the Courts should exist. We are already part of the scenery. Perhaps, one day not too far away, we will be such a familiar part that we are scarcely noticed.

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