§ Mr. McNamaraTo ask the Chancellor of the Exchequer what plans he has to review the £100,000 maximum binding limit for awards against firms by the Personal Investment Authority Ombudsman for the mis-selling of personal pensions. [2468]
§ Ruth KellyThe Personal Investment Authority Ombudsman Bureau will cease to exist when the Financial Services and Markets Act 2000 comes into force at midnight on 30 November. The successor body is the Financial Ombudsman Service.
Redress for mis-selling personal pensions takes the form of directing a firm to take an action, either to fund the reinstatement of a mis-selling victim to their occupational pension scheme or to top-up their personal pension. Where the Financial Ombudsman Service makes any direction to a firm, the cost to the firm will not be subject to a specific limit in cash terms, although all Financial Ombudsman Service awards will be subject to "fair and reasonable" criteria.
Under Section 229(4) of the Financial Services and Markets Act 2000 (FSMA), it is for the Financial Services Authority (FSA) to specify the maximum amount that may be regarded as fair compensation for loss or damaged suffered by the complainant. Following a number of consultations on the Financial Ombudsman Scheme and its rules, the FSA decided that the maximum binding limit on firms for money awards should be £100,000. However, the Ombudsman may recommend that firms pay the balance on a voluntary basis. There was widespread support for that limit but also general agreement that the limit should be capable of regular review. The FSA confirmed that it would review the limit, in consultation with the Financial Ombudsman Service, and in the light of experience, every three years.