“There is not a strong case to merge TPO and FOS at the present time” is the conclusion of a tailored review of the Pensions Ombudsman (TPO) published by the DWP.
A merger between the two Ombudsmen has been suggested in the past due to the overlaps in their jurisdictions, for example, both can determine complaints about the administration of personal pensions (including group personal pensions).
As the report points out, due to the difference in their respective underlying legislative frameworks, TPO and FOS could reasonably reach different conclusions on an identical case. TPO decides complaints on the basis of what a court would decide, whereas FOS makes determinations based on what is considered ‘fair and reasonable’ taking into account relevant law and regulations, regulator’s rules, guidance and standards, codes of practice and (where appropriate) what the ombudsman considers to have been good industry practice at the relevant time.
This unsatisfactory situation is compounded by each Ombudsman being subject to different award limits, with FOS currently having a limit of £350,000 while TPO has no limit on the amount that it can award.
The report expresses concern that these differences could be exploited, for example, by knowledgeable customers finding out which Ombudsman would be more likely to determine in their favour (or give a larger award) or by providers signposting members to the body they think more likely to rule in their favour. In the DWP’s view this “undermines fair and equal access” as it disadvantages less informed consumers.
However, the report concludes that without addressing the underlying differences in the legal framework and ownership of regulatory responsibilities (TPO falls within the remit of the DWP while FOS is the responsibility of HM Treasury), a merger would cause inevitable operational risk and realise limited savings. Instead, it recommends that TPO should “continue building its relationship with FOS and develop a collaborative process to reduce the potential for customer confusion and duplication of efforts”. This could include, for example, engaging with the pensions industry to ensure that there is clarity on where customers should be directed, thereby hopefully limiting the potential for customers to be transferred between the two organisations.
The report also recommends that the question of whether the two bodies should be merged is kept under review.