The Financial Ombudsman Service (FOS) annual review shows a massive increase in the number of complaints being made about the UK’s financial institutions. The review revealed that the FOS, which adjudicates on complaints where the firm does not resolve the matter to the customer’s satisfaction, received 508,881 complaints in the period from 1 April 2012 to 31 March 2013. This figure represents an increase of 92% on the previous 12 months, by far the largest such increase in recent years.

Complaints about payment protection insurance (PPI) had comprised more than half the Ombudsman’s workload for the previous two years, but here the proportion of PPI complaints was even higher, with the 378,699 complaints about this product representing 74% of the total. The PPI figure represents a massive increase of 140% compared to 2011/12. The FOS has taken on large numbers of extra staff in recent years to cope with its workload, but even so, it had only expected to receive 165,000 PPI cases in the year 2012/13. The second most complained about product was credit cards with 19,634 grievances.

76% of the complaints received concerned the UK’s banks, with four banking groups responsible for 62% of the total. The four largest banking groups – Lloyds, Barclays, RBS and HSBC – were responsible for 70% of PPI complaints.

A higher proportion of complaints than ever before, at 24%, came from customers aged over 65. The review contends that many complaints from older people concerned PPI.

As well as PPI, there were significant increases in the numbers of complaints regarding certain other areas of financial services, even if the total numbers in many cases remain small. Payday loan complaints were up by 83% to 542, PEP complaints rose by 159% to 132, income drawdown complaints rose by 101% to 189 and term assurance complaints rose by 149% to 3,572. The area showing the largest percentage decrease was structured investment products, where complaints were down by 22%.

Some 11% of cases are currently taking more than 12 months to complete, and this rises to 19% for PPI, evidence of the significant workload the FOS faces. Some 223,229 complaints were closed during the 12 month period, with the FOS finding in the customer’s favour in 49% of cases, but this figure rises to 65% for PPI. Uphold rates for individual firms are not included in the review, but the FOS has previously published data showing that, in the second half of 2012, more than three quarters of PPI complaints made regarding Barclays, Lloyds TSB and Bank of Scotland were upheld by the Ombudsman.

Chief ombudsman Natalie Ceeney laid the blame for the increase on financial firms who failed to handle complaints effectively. “As levels of confidence in financial services have eroded, it is disappointing that we still haven’t seen any significant improvement in complaints handling. Too many financial businesses still seem unable to sort out problems themselves, without the ombudsman having to get involved,” said Ms Ceeney.