The year has been characterised by several challenging issues, including mortgage endowments and split capital investment trusts. However, we have begun to reap the benefits of our flexible approach to working, by being able to move case-handling staff quickly to areas of high demand, where necessary.

We have received about 4,200 complaints in total relating to split capital investment trusts, and we have so far resolved about 1,000 of them. These complaints throw up complexities beyond those raised by the fact that there is an ongoing FSA investigation into the sale of these products, and by the complicated nature of “splits” themselves.

Many of the complaints combine issues that are specific to the particular case, and that can only be assessed in the circumstances of each individual case, with “splits”-specific issues (those that can only be assessed collectively for all “splits” cases). “Splits”-specific information identified in individual cases has to be fed back to the collective assessment. “Splits”-specific conclusions then have to be fed back to the outcomes of individual cases. And the position on the “splits”-specific issues can vary over time.

That would be complicated enough, even if individual cases involved a service provided on a single date for a single type of share in one “split”. But each investor may have a portfolio of different “splits” shares, and the firm may have provided a continuing service over a period of time.

We have continued to arrange working together conferences throughout the year, as well as presentations, seminars and workshops around the country. We have also held ten roadshows specifically for mortgage and general insurance intermediaries, to give them an opportunity to find out more about the benefits of joining our voluntary jurisdiction before they become regulated by the FSA in 2004/05.

Following consultation with firms and consumer organisations, in March 2003 we increased the budget assumption for new complaints by 5,000 to 60,000, and this was approved by the FSA as our final budget. However, we now expect the number of new complaints to rise to 98,000 – 58% above last year’s figure of 62,170 and an increase of 63% compared with the budget. The revised numbers reflect an increase over the 2003/04 budget of 150% for mortgage endowment cases and of 20% for cases about other products (mainly as a result of increased numbers of complaints about single premium investment bonds and split capital investment trusts).

The forecast for 2003/04 is based on the assumption that complaints about mortgage endowments will continue at their current level and that we will continue to receive complaints about all other products at the same rate we saw in the first half of the current year.

In last year’s budget we assumed we would resolve and close 63,000 cases in 2003/04. However, following the increase in the volume of cases reaching us, we now expect to resolve 80,000 cases in 2003/04. Important factors in helping us to achieve this have been the recruitment of additional adjudicators and the setting up of a special mortgage endowment project, enabling us to handle the large number of complaints as efficiently as possible.

We define productivity as the average number of cases resolved per week by each case handler. Up to December 2003, productivity was 4.7 cases per case handler, exceeding our target of 4.4 cases. We expect productivity to increase for the remainder of the year as our newly-recruited staff gain experience, and we see the benefits of our streamlined approach to mortgage endowment cases. There is a difference between the productivity levels for mortgage endowment complaints and those for complaints about other products. This is because the high volume of mortgage endowment complaints makes it possible to implement a streamlined process, and to achieve increased productivity through economies of scale. We have therefore been able to resolve these cases at a considerably higher rate, without compromising on quality or consistency. The cases that involve subject areas other than mortgage endowments include those that are particularly complex and time-consuming, such as split capital investment trusts, portfolio management, and personal pensions.

Work-in-progress had increased to 28 weeks at the end of December 2003 but is likely to have reduced to 23 weeks by the end of March 2004. This is above the level anticipated in the budget, and is almost wholly due to the unexpected increase in mortgage endowment cases.

We expect the level of timeliness for 2003/04 to be close to the targets set in the budget (see paragraph 2.7), although the need to divert resources to the mortgage endowment project is expected to result in a small slippage in meeting the 3-month target.

We know, from our consumer satisfaction surveys, that the length of time it can take for some cases to be allocated to an adjudicator is a cause of frustration. By the end of 2003/04, for complaints about products other than endowments, we will have reduced this time down to 8 weeks from the current average of 11 weeks. For mortgage endowment complaints, we hope the waiting time will have reduced from 18 weeks to 13 weeks.

Because of the higher number of case fees invoiced during the year, we expect income to be £6.7m above budget. We expect expenditure to be £4.8m above budget, reflecting the costs of the additional staff (and staff-related costs) needed to handle the extra workload. Our unit cost is forecast to be £489 compared with the figure of £541 in the budget.