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feedback on the Financial Ombudsman Service plan & budget 2003/04

April 2003

  1. In January 2003 we published our plan & budget, a consultation document on our budget and workload projections for 2003/04.
  2. Since these projections were put together in December 2002, there has been a significant increase in the number of enquiries to our Customer Contact Division (CCD), and a corresponding increase in the number of new cases referred on to the casework divisions. Our estimate for new cases received in the current year, 2002/03, has therefore increased from 55,000 to 58,500.
  3. In our plan & budget, we had included a model based on a 10% increase in our workload in the financial year 2003/04. In order to deal with this increase, we propose to:
  • increase our staffing levels from 550 to 583 by March 2004;
  • close an additional 4,000 cases;
  • maintain productivity levels and timeliness targets; and
  • leave our tariff rates unchanged.

These proposals will also reduce the unit cost to £541, by spreading our fixed costs over a greater number of case closures.

  1. We have decided to change our workload assumptions as, in the first months of 2003, the number of enquiries to CCD about mortgage endowment policies has increased by 10%. They now represent 25% of CCD's current workload. Inevitably this will lead to an increase in casework as a proportion of these enquiries are converted into chargeable cases. From feedback at the meetings we held during the budget consultation period, it would seem that the level of work relating to mortgage endowments will increase in 2003. Additionally, we have received comments indicating that our estimate for the number of complaints about single-premium investment bonds coming to us was low.
  2. We have therefore increased from 16,000 to 20,000 our estimate for new complaints about mortgage endowment policies coming to us in 2003/04. And we have increased from 2,500 to 3,500 our estimate for the number of complaints about single-premium investment bonds coming to us in the same period.
  3. To try and maintain our timeliness targets for resolving cases, we propose to recruit an additional 25 members of staff for our casework divisions. Half of these staff will be in post by 1 April 2003 and the remainder by 1 July 2003. This will enable us to close an additional 4,000 cases during 2003/04.
  4. The revenue from the higher number of cases we will be closing will finance the additional staff, so there will be no increase in the annual levy tariff rates. The unit cost will fall to £541. This means that 65% of our funding will be raised through case fees and 35% through the general levy.
  5. These changes to our budget were approved by the Board of the Financial Services Authority at their March meeting.
  6. The revised figures showing our actual, forecast and budgeted workload are as follows:

summary

  2001/02 actual 2002/03 forecast 2003/04 original budget 2003/04 revised budget
opening work-in-progress 14,781 18,917 19,417 21,917
new cases 43,330 58,500 55,000 60,000
cases closed 39,194 55,500 59,000 63,000
closing work-in-progress 18,917 21,917 15,417 18,917
work on hand (weeks) 22 21 14 16
productivity 3.8 4.7 4.4 4.4
cases closed within 3 months     45% 45%
cases closed within 6 months 73% 78% 80% 80%
cases closed within 9 months     90% 90%
cases closed in under 12 months 100% 96%    
cases closed in over 12 months reported to the board

Customer Contact Division (CCD)

  9 months 2002/03 forecast 2002/03 original budget 2003/04 revised budget 2003/04
telephone calls 190,000 260,000 260,000 285,000
new written enquiries 56,000 70,000 67,000 75,000
total 246,000 330,000 327,000 360,000

New Complaints - analysis by product

  actual 2001/02 forecast 2002/03 original budget 2003/04 revised budget 2003/04
dual variable-rate mortgages 575 6,500 0 0
endowment policies linked to mortgages 14,595 11,850 16,000 20,000
personal pensions 5,881 6,000 6,000 6,000
non-mortgage linked endowments 3,647 3,400 3,500 3,500
mortgage loans 3,301 2,900 3,400 3,400
motor insurance 1,609 2,400 2,400 2,400
single-premium investment bonds 362 2,200 2,500 3,500
split capital investment trusts 0 2,500 3,000 3,000
current accounts 1,280 1,400 1,500 1,500
savings accounts 1,230 1,300 1,500 1,500
buildings insurance 985 1,250 1,250 1,250
travel insurance 884 1,000 1,000 1,000
other banking products 1,642 3,300 3,500 3,500
other insurance products 3,277 5,000 4,850 4,850
other investment products 4,062 7,500 4,600 4,600
total 43,330 58,500 55,000 60,000

expenses

£m actual 2001/02 forecast 2002/03 original budget 2003/04 revised budget 2003/04
staff and staff-related costs 19.7 21.3 22.9 24.4
professional fees 0.5 0.6 0.4 0.4
IT costs 0.8 0.9 1.3 1.4
premises and facilities 3.5 4.0 4.2  
other costs 0.3 0.4 0.5 0.5
depreciation 2.7 2.7 3.2 3.2
operating costs 27.5 29.9 32.5 34.1
financing costs 0.7 0.4 0.6 0.6
total costs 28.2 30.3 33.1 34.7
cases closures 40,000 55,500 59,000 63,000
unit cost 688 540 551 541

unit cost is calculated before financing charges

Headcount ("full-time equivalent")

  budget 2002/03 forecast 2002/03 original budget 2003/04 revised budget 2003/04
casework divisions 298 353 383 408
customer contact division 87 85 85 93
communications 16 17 18 18
business improvement 9 9 9 9
knowledge management 3 7 8 8
sub-total 115 118 120 128
support services 45 45 47 47
total 458 516 550 583
image: plan & budget

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