2026 complaint handling goals: FOS interest changes and why timing matters

The start of a new year is often when regulated firms take stock - what worked, what didn’t, and what needs tightening before volumes, deadlines and regulatory expectations start to stack up again.

For regulated complaint teams, this reset never arrives as a clean slate. Complaints do not pause for planning cycles, and regulatory timelines continue regardless of workload or resourcing pressure.

That is why a small but meaningful change that came into effect on 1 January 2026 is worth paying attention to.

🗓️ What changed on 1 January 2026?

The Financial Ombudsman Service (FOS) updated how interest is applied to compensation awards.

Instead of the long-standing flat 8% (percent) rate, interest on compensation now broadly tracks the Bank of England (BoE) base rate plus 1% (percentage point). The original 8% (percent) rate still applies where firms miss the payment deadline set by FOS.

This change applies to all complaints referred to the FOS on or after 1st January 2026.

On its own, this might look like a technical adjustment. In reality, it sharpens the link between time, process quality and financial exposure.

Why applied interest highlights process weakness

Interest is rarely the root problem. It is more often a symptom of earlier breakdowns in process.

By the time a complaint reaches FOS, the outcome has usually been shaped by what happened much earlier. Delays in responding. Decisions that took too long. Inconsistent communication. Missed regulatory follow-ups.

For general insurers, complaints regarding household, motor or travel claims are in the top five regarding FOS referrals. For financial services firms, they may arise in account handling, lending decisions, service failures, or problems with goods supplied, such as motor vehicles.

When these early issues are not resolved cleanly, they tend to surface later as formal complaints, often with additional cost attached.

Added interest is a visible signal of customer dissatisfaction, loss of trust, and a breakdown in how processes have operated when firms are asked to put things right.

Complaints are part of the wider customer journey

One of the recurring challenges across regulated firms is that complaints are treated as a separate service recovery mechanism, rather than the final stage of a longer customer journey.

Different teams. Different systems. Different timelines. Silo mentality.

This fragmentation makes it harder to maintain momentum once something starts to go wrong. Cross-functional collaboration is constrained by process or technology barriers, and without always realising it, inefficiency and misalignment set in. The customer experience is diluted across handovers.

By the time a case escalates, customer trust has eroded and the opportunity to resolve the complaint efficiently has passed by.

These breakdowns map directly to weaknesses in everyday complaint handling frameworks, particularly around communication, categorisation, and timely correction of issues. They are not new challenges, but the shift in how interest is applied reinforces that outcomes, not intent, are now what matter most.

Using the FOS interest calculator

To help firms understand the financial impact of interest on compensation, the FOS provides an online interest calculator. This allows firms to see how much interest they may need to add to a payment award using the BoE rate plus 1% (percent).

It’s a practical tool, not just for calculating redress payments, but for illustrating how resolution delays compound cost. The longer a case remains open, the more interest becomes part of the final outcome.

Because interest is only applied at the end of an investigation, many firms underestimate its impact on overall complaint cost. The calculator makes the cumulative effect clearer much earlier in the complaint lifecycle.

Accurate redress is only one part of effective complaint handling. It needs to sit within a wider, consistent framework that governs how complaints are captured, assessed, and closed.

What this means for 2026 planning

For firms setting priorities for the year ahead, the takeaway should not be to simply avoid interest being applied. The focus needs to be on delivering better processes and communications to prevent cases from escalating in the first place.

This typically includes:

• Clear ownership of cases from start to finish

• Timely, well-reasoned decisions

• Good communication with customers while decisions are being made

• Structured processes that reduce rework and delay

When claims and service issues flow well, complaints reduce. When complaints reduce, escalation becomes less frequent and additional costs, including interest payments, are mitigated.

Getting the basics right remains the priority

Regulatory expectations continue to evolve. The FCA has made it clear that it expects firms to deliver fair value and effective consumer support throughout the entire relationship.

Compensation awards that include interest are often a sign that it’s not being consistently delivered.

For many firms, the most effective goal for 2026 is ensuring that the fundamentals of complaint handling, particularly communication and process control, are operating as they should.

The Q3 2025 insurance complaint data released by the FOS states that 32% (percent) of cases escalated were still upheld in favour of the consumer.

Progress is being made, but there remains further ground to cover, particularly in motor finance and general insurance.

FAQs

When does a complaint escalate to the Financial Ombudsman Service?

A complaint can be referred to the FOS if the firm has issued a final response and the customer remains dissatisfied, or if eight weeks have passed without a final response being provided.

How does the FOS apply interest to compensation awards?

The FOS calculates interest on compensation by using a time-weighted average rate of interest. The applied interest is from the date of the loss with the aim of putting the customer back to their original position before the loss occurred.

From 1 January 2026, interest on compensation awarded by the FOS generally tracks the Bank of England base rate plus 1% (percent). The previous flat 8% (percent) rate still applies where firms miss the FOS payment deadline.

What’s a time-weighted average rate of interest?

The FOS calculates one average rate for the entire deprivation period, from the date of loss to the date of settlement. This reflects the length of time each base rate was in effect and provides a more accurate picture than a simple average.

Why does complaint handling speed matter under DISP complaint handling rules?

Speed is central to treating customers fairly and meeting Consumer Duty expectations. Delays can cause additional distress, particularly for vulnerable customers.

Fast, fair and consistent resolutions also help reduce reputational and financial risks, and create opportunities to rebuild trust.