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annual review 1 April 2005 to 31 March 2006 - chairman's foreword

This year's annual review marks an important turning-point for the Financial Ombudsman Service. After five consecutive years of reporting an ever-rising flood of complaints to the ombudsman service - with recent year-on-year increases in workload of up to 57% - we have now at last seen the level of new complaints starting to stabilise.

This year the number of disputes referred to us exceeds last year's figure only marginally - just under 113,000 new cases, out of a total of almost 700,000 initial complaints and enquiries. And for the first time in recent years we have seen an annual decrease - albeit only a very tiny one - in the volume of mortgage endowment complaints. This may indicate that the deluge of mortgage endowment complaints could finally be on the point of receding. However, the steady flow of incoming new cases - predicted to continue into next year - means we are still operating at high-water level.

With almost two-thirds of our workload still taken up with the mortgage endowment flood, other features of the complaints landscape seem less prominent. Yet there is life beyond mortgage endowments. And some interesting trends are emerging in other areas, which could be a useful indicator of what the complaints world might look like after the endowment deluge. For example, while investment-related complaints other than mortgage endowments fell by 18% during the year, insurance disputes referred to the ombudsman service rose by a quarter and banking-related cases increased by a third.

One of the most pleasing statistics from this year's annual review is the number of complaints we have resolved and closed during the year: just under 120,000 cases - a third more than last year, and the highest number we have ever achieved. The sometimes difficult decisions the board and management have had to take - on investing in new processes, people and resources in the face of rapidly-rising complaint volumes - have been justified. The figure is also proof of the hard work and effort of everyone involved - for which I am deeply grateful.

After I became chairman last year, I set out to get a better picture of how we are seen by our major stakeholders - consumer organisations and firms. I met chief executives, and in some cases chairmen, and took part in constructive discussions about the role of the ombudsman. Much of the feedback was positive, some was challenging. Everyone I spoke to was encouraging and supportive of our work, recognising the stresses and strains that we - and the industry - have experienced in recent years as a result of the massive mortgage endowment workload.

People I have been meeting and talking to have been just as interested in our plans for the future. And having withstood the pressures and challenges of recent years - and achieved a level of stability - we recognise that it is now time to share what is on our agenda for the next few years ahead. We set out much of this in our first corporate plan launched in January 2006 - a document, available on our website, that I commend to all readers of this annual review. Producing the corporate plan gave us the opportunity to draw breath, after several years of continuously manning the pumps to keep the mortgage endowment waters under control. With the realistic probability of our workload stabilising for the first time, we have grasped this opportunity to reflect strategically on what we are doing and what we could do differently, and better, in future.

As ombudsman service colleagues and I continue our regular rounds of visits, meetings and contacts with the outside world, I hope that everyone with an interest in our service will feed in their views on the themes and projects we have identified in our corporate plan. I am, of course, equally keen for feedback on this latest annual review.

This review includes, as usual, the report from the independent assessor, Michael Barnes. The independent assessor's role is to investigate complaints from firms and consumers about standards of service provided by the Financial Ombudsman Service. The independent assessor reports directly to me and my board colleagues. His annual report to us, which we publish in full, gives an insight into how our actions and processes affect consumers and firms in individual cases, as well as focusing attention on more general issues. This year, for example, the independent assessor draws attention to issues relating to redress calculations by firms - which we will be considering carefully and discussing with the Financial Services Authority. I am very grateful to Michael Barnes for his diligent work in providing a fair and impartial mechanism for people unhappy with our service - and at the same time providing us with a valuable mechanism for feedback and scrutiny on our performance.

Chris Kelly signature

Sir Christopher Kelly KCB June 2006