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corporate plans and budgets » Plan & Budget 2003/04 - tariff and case fee information


7.1 The annual levy this year (before the bad debt provision) is expected to collect £0.4m more than required. The forecast surplus for 2002/03 is £3.4m, mainly relating to the greater number of case fees. Together with our reserves of £0.8m brought forward from last year, this will give us potential reserves of £4.2m.

We will use these reserves to write-off the remaining establishment costs of £3m immediately, rather than recovering them over the next two years. This proposal has been strongly supported by the cross-section of industry practitioners and trade body representatives who form our Industry Funding Group.

income analysis
budget 2002/03 £m
forecast 2002/03 £m
budget 2003/04 £m
case fees

case fees

7.2 Our original assumption was to have a 50:50 levy/case fee split in our first year. However, in Consultation Paper 74 - Funding the Financial Ombudsman Service - (CP74 - issued jointly by the FSA and ourselves) it was suggested that the ‘user pays’ element might be allowed to rise in the light of experience, after the scheme had been running for a time. We expect that in 2002/03 case fees will amount to 58% of our income.

We propose to keep the case fee at the present level of £360. Case fees will then constitute 64% of our income. Again this proposal is supported by the Industry Funding Group. There are practical reasons for maintaining consistency in the case fee, quite apart from this being in line with the policy aim set out in CP74.

Looking ahead to the possibility of a tiered case fee (an option also favoured by many in the industry), keeping £360 as the fee for a case that requires a full investigation might allow us to introduce a lower fee for cases that can be concluded at an earlier stage (for example, a case resolved by mediation at the assessment stage). We do not yet have a legally definable 'assessment' stage, nor a definite feel for how many cases might be concluded at this point in the process. However, these matters could form part of next year's consultation on the possibility of introducing the lower fee for certain cases.

7.3 Maintaining the case fee at £360 would allow for an approximate 24% reduction in the overall levy. The tariff rates would then be adjusted accordingly.

7.4 The 'special case' fee is £720 in 2002/03. This is the fee charged for complaints about small businesses, or those involving firms that pay no annual levy. In calculating this amount, we equated the special case fee to the total cost of handling a complaint (equivalent to the levy and a case fee). We propose to reduce the special case fee to £600 for the year 2003/04.

overall impact on firms

7.5 The proposals in this budget strategy (together with the forthcoming proposals for tariff rates) would result in:

  • the industry paying the levy at tariff rates that - overall - are 24% less than this year;
  • less of the burden of paying for the Financial Ombudsman Service falling on those firms that do not have complaints referred to us;
  • those firms that do have complaints referred to us shouldering a greater proportion of the costs of the Financial Ombudsman Service, but by paying the same case fee in 2003/04 as in 2002/03.

7.6 We give below some examples of levies resulting from the proposed tariff reduction and the absence of a supplementary levy (assuming constant business, year on year). Since the amount raised from each tariff block relates to the number of complaints handled, the reduction in the tariff rate will not be the same for each block.

  • A bank or building society with 2 million relevant accounts would pay £25,000 as opposed to £35,060.
  • A general insurer with £100 million relevant premium income would pay £11,600 as opposed to £17,770.
  • A life office with £200 million of relevant premium income would pay £18,400 as opposed to £21,860.
  • A three-partner IFA firm not holding client money would pay £75 rather than £117.


7.7 In 2003/04 the levy on firms will be substantially reduced and the case fee will remain the same. During 2003/04 we will review what proportion of our costs we should raise through the annual levy and whether we should introduce tiered case fees.