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ombudsman news

issue 49

September/October 2005

National Savings & Investments joins the Financial Ombudsman Service

From 1 September 2005, new complaints about National Savings & Investments (NS&I) have been investigated and decided by the Financial Ombudsman Service.

This article gives the background to this significant development and describes how these complaints were dealt with previously, and how their treatment now differs.


NS&I – a government department and an executive agency of the Chancellor of the Exchequer – is one of the largest savings organisations in the UK, selling savings and investment products to personal customers both directly and through the Post Office.

NS&I provides a secure place for people to save; its products do not involve any real risk to a saver’s capital. It is also a source of funding for the exchequer. The money that NS&I receives from selling savings and other financial products is used by HM Treasury to help to manage the national debt. In return for lending money to the government, customers receive interest on their savings or are eligible for Premium Bond prizes.

NS&I is not regulated by the Financial Services Authority (FSA) but it aims to operate in accordance with the spirit of FSA regulations when dealing with its customers.

It has been the government’s objective since early 2002 that NS&I should ultimately join the jurisdiction of the Financial Ombudsman Service. And in order to provide some harmonisation between the treatment of unresolved complaints against NS&I and unresolved complaints against FSA-regulated financial firms, a Financial Ombudsman Service ombudsman has been serving as the Independent Adjudicator for National Savings & Investments (the adjudicator) since May 2002.

the adjudicator

The Adjudicator:

  • was appointed by HM Treasury, under section 84 of the Friendly Societies Act 1992;
  • decided disputes between NS&I customers and the Director of Savings (the statutory post-holder responsible for NS&I);
  • had power to deal with disputes under various Acts of Parliament relating to the national debt (for example, the National Debt Act 1972), and under a number of statutory instruments, including those relating to Premium Bonds and savings certificates;
  • could only consider cases where there was a disputed claim to some legal entitlement, such as a dispute over the ownership of a sum of money or claims for compensation for financial loss;
  • did not deal with complaints about matters of policy, such as levels of interest rates or the terms and conditions of NS&I products.

NS&I customers who had complaints about maladministration had to refer these, via their member of parliament, to the parliamentary ombudsman. The parliamentary ombudsman investigates complaints from members of the public about unfair or improper actions or poor service by UK government departments and certain other public bodies.

the adjudicator’s powers and procedures

Before a dispute was referred to the adjudicator for a decision, both the customer and NS&I would have had the opportunity to comment on the other party’s evidence and arguments. The dispute would already have been considered under NS&I internal dispute-resolution procedure.

The powers and procedures of the adjudicator were those of a statutory arbitrator. In the main, he decided cases on the basis of documents only – and reached a decision based on legal principles. Unlike the Financial Ombudsman Service, the adjudicator did not have to issue his provisional assessment of the complaint or any preliminary indication of his decision – he was entitled to proceed straight to a final decision. He could hold an oral hearing where appropriate but his powers and procedures were not conducive to the mediated or conciliated settlement of disputes. His decisions were final and legally binding on both parties to the dispute.

If a dispute fell within the adjudicator’s remit, the customer did not have the option of taking it to court but had to refer it to the adjudicator. However, either party could ask a court to rule on whether theadjudicator had misunderstood or misapplied the law when reaching his decision.

public consultation and rule changes

Following a public consultation, the rules of the Financial Ombudsman Service were changed to allow NS&I to join the ombudsman service, meaning that NS&I customers can now refer disputes to us, including the types of disputes that have been referred in the past to the adjudicator and the parliamentary ombudsman.

the voluntary jurisdiction

Because NS&I is not regulated by the FSA, it has had to join our voluntary jurisdiction. This is a technicality, as complaints under the voluntary jurisdiction are dealt with in the same way as they would be under the compulsory jurisdiction. And NS&I’s commitment to their continued membership of the voluntary jurisdiction is to be embodied in NS&I’s framework document, which will publicly set out the aims of NS&I, how it is managed and its relationship with government.

the new arrangements from 1 September 2005

The adjudicator will continue to deal with and decide those disputes that were referred to him before 1 September. He will do so using the powers and procedures which applied to disputes before 1 September, and he will continue to use the title adjudicator when doing so.

But the Financial Ombudsman Service will deal with disputes, or "complaints" as the Financial Ombudsman Service usually calls them, which are referred after 31 August 2005 (including those that relate to events that occurred before 1 September).

So the following powers and procedures will apply to such complaints, in contrast to those that applied before.

  • The Financial Ombudsman Service will deal with complaints about maladministration as well as those about legal entitlements.
  • The rules of the voluntary jurisdiction require NS&I to comply with most of the FSA’s complaint-handling rules, as if it were a regulated financial firm.
  • While we will continue to take account of legal principles, we will reach a decision which, in our opinion, is fair and reasonable in all the circumstances.
  • In our decision-making, we will be able to take account of codes of practice and what we regard as good industry practice; NS&I already subscribes to the Banking Code.
  • We will try and reach a conciliated settlement of a complaint, if that is what seems most fair and appropriate to us.
  • We will have the same right to dismiss an NS&I complaint without considering its merits as we have in relation to all other complaints.
  • If we intend to resolve a complaint by a written decision, we will first issue a provisional assessment, indicating what that decision is likely to be, for comment by both parties.
  • The complainant will not be bound to accept our decision and will remain free to take the case to court.

Because one of our ombudsmen served as the adjudicator for several years, the Financial Ombudsman Service is already familiar with NS&I’s business and has had a head start in successfully incorporating NS&I complaints into its procedures.

Walter Merricks, chief ombudsman

ombudsman news issue 49 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.