Category: Insurance case law · Reviewed by Simon Temme, Account Executive · Last reviewed June 2026
An overview of the Financial Ombudsman Service approach to complaints against IFAs, including jurisdictional limits, the treatment of multiple complainants and key Ombudsman jurisprudence.
[verify citation]The Financial Ombudsman Service (“FOS”) was established by the Financial Services and Markets Act 2000 (“FSMA”) as the statutory alternative dispute resolution scheme for retail financial services complaints. The FOS jurisdiction extends to the activities of authorised firms including independent financial advisers, insurance brokers, banks and lenders. The Ombudsman determines complaints on the basis of “what is, in his opinion, fair and reasonable in all the circumstances of the case”, taking into account (but not bound by) the relevant law, the regulator’s rules and guidance, codes of practice and good industry practice (FSMA s.228(2)).
The FOS award limit has been increased on a number of occasions. As at the current rules (DISP 3.7), the binding award limit for complaints referred to the FOS on or after 1 April 2019 about acts or omissions on or after that date is £375,000 (uprated annually with CPI); the limit for older acts or omissions is £160,000; and historic limits applied to earlier complaints. The Ombudsman may also recommend (but not require) compensation in excess of the limit.
The case of Cussen v Allied Insurance Brokers and the broader body of Ombudsman jurisprudence has shaped the way in which IFA and broker complaints are categorised, aggregated and quantified. Issues regularly arising include: (i) whether multiple complaints arising out of the same advice or transaction should be treated as a single complaint; (ii) the relationship between the FOS award limit and contractual policy limits in PI cover; (iii) the FOS approach to redress methodology in pension transfer cases (the so-called “FCA methodology”); and (iv) the treatment of complaints by joint holders, trustees and dependants. [verify citation — Cussen]
The principal issues raised by the FOS jurisprudence in this area are: (i) the proper construction of the Ombudsman’s “fair and reasonable” jurisdiction in cases where the law and the regulator’s rules point in different directions; (ii) the extent to which the FOS award limit may be exceeded by the cumulative effect of multiple complaints arising out of related acts or omissions; (iii) the interaction between FOS awards and the aggregation provisions of the firm’s PI cover, in particular under the FCA Minimum Terms applicable to IFAs (MIPRU 3); (iv) the application of FOS redress methodology to pension transfers, defined benefit transfers and SIPP-related complaints; and (v) the availability of judicial review of FOS decisions on the ground of irrationality, procedural unfairness or error of law.
The FOS approach, as developed in Cussen and a wide body of subsequent final decisions, can be summarised as follows. [verify citation] First, the Ombudsman generally treats each complaint as a separate matter for the purpose of the award limit, even where the underlying advice or transaction is the same, so long as the complainants are separate persons with separate interests. This can mean that a firm’s overall exposure to a single advice failing exceeds the per-complaint award limit.
Second, the Ombudsman has consistently held that the “fair and reasonable” jurisdiction permits him to depart from the strict legal position where the regulatory rules and good industry practice require a different outcome. Judicial review applications have generally been unsuccessful in challenging this approach, the courts treating the Ombudsman’s exercise of his statutory discretion with considerable deference.
Third, in pension transfer cases the FOS applies the FCA’s redress methodology (currently set out in FG17/9 and successor guidance), which is largely formulaic and produces redress figures that can be substantial even where the legal causation analysis would suggest a smaller award.
Fourth, the FOS is generally unwilling to give effect to the firm’s PI insurance position when determining quantum: insurers’ rights, including aggregation under MIPRU 3 minimum terms, must be worked through separately as between the firm and its insurer.
The Financial Ombudsman is exercising a statutory jurisdiction to determine complaints on the basis of fairness and reasonableness, and is not strictly bound by the common law or by the firm’s contractual PI position. Multiple complainants arising out of common advice may each recover up to the award limit. Judicial review will only succeed on the limited public law grounds of irrationality, procedural unfairness or error of law.
For IFA PI insurers, the FOS jurisprudence is of central importance for three reasons. First, the per-complaint award limit (currently £375,000) does not cap the firm’s overall exposure where there are multiple complainants. A single advice failure affecting (say) 50 clients can result in cumulative FOS awards far exceeding any per-claim policy limit, and the aggregation of those FOS awards under the policy must be analysed by reference to the policy wording and the FCA Minimum Terms (MIPRU 3) which require an “originating cause” basis of aggregation for IFA PI.
Second, the FOS redress methodology in pension transfer cases produces awards on a basis that diverges from the common-law measure, and may produce awards substantially in excess of those that would be awarded in court. PI insurers must therefore reserve on the basis of the FOS methodology rather than the common law where the firm is in FOS scope.
Third, the limited scope for judicial review means that PI insurers cannot generally rely on legal arguments to overturn adverse FOS decisions, and must instead focus on the underlying suitability and process issues at the point of advice.
[verify citation][verify citation]By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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