FOS interest rate changes in 2026: why timing matters in complaint handling

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 don’t pause for planning cycles, and regulatory timelines continue regardless of workload or resourcing pressure.

This is why the Financial Ombudsman Service’s (FOS) interest change from 1 January 2026 matters more than it may first appear. On paper, it’s a change to how interest is applied to compensation. In practice, it reinforces the cost of delay, weak process control, and complaints that are allowed to drift.

What’s the new FOS interest rate on compensation?

From 1 January 2026, the Financial Ombudsman Service generally applies simple interest at the time weighted average of the Bank of England base rate plus 1% to compensation awards for complaints referred on or after that date.

For complaints referred before 1 January 2026, the previous 8% simple rate still applies. FOS also says 8% still applies where firms miss the payment deadline it has set.

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

Why interest on compensation highlights process weakness

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.

When these early issues are not resolved cleanly, they often reappear later as FOS escalations, with additional cost attached to them.

Interest on compensation isn’t just a redress calculation. It’s often a visible signal of customer dissatisfaction, loss of trust, and a breakdown in complaint processes.

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. Siloed working.

In complaints involving several stakeholders, the disconnect often extends beyond internal teams. Depending on the case, insurers, brokers, lenders, suppliers, repairers, loss adjusters, and other third parties may all hold part of the picture the complaint team needs to bring together. When ownership is unclear, accountability can be passed from one party to the next, leaving the customer stuck in the middle of siloed systems and disjointed communication.

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

These breakdowns often reflect weaknesses in the core areas of complaint handling, especially communication, categorisation, and timely action. They’re not new challenges, but the change in how interest is applied reinforces how costly those gaps can become. It’s one reason why structured approaches matter in practice, and why the 5 Cs of complaint handling provides a useful framework for teams under pressure.

Using the FOS interest calculator

To help firms understand the financial impact of interest on compensation, the FOS provides an online interest calculator. It’s designed to help firms work out what may need to be added to an award using the Bank of England base rate plus 1%, and FOS also publishes the underlying calculation method.

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 shouldn’t be to simply avoid interest being applied. The focus needs to be on improving process control, decision quality and customer communication, so cases are less likely to escalate in the first place.

This typically includes:

• Clear ownership of cases from start to finish

• Timely, well-reasoned decisions

• Clear, timely 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 easier to control.

Why the basics still matter

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. Complaint handling is often where firms find out whether written policies and intended customer support standards are actually working in practice.

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 FOS data for July to September 2025 showed an overall uphold rate of 33% across all financial products. Progress is being made, but there is still clear value in reducing avoidable escalation and strengthening complaint handling earlier in the journey.

Frequently asked questions about FOS interest changes and complaint handling delays

When does a complaint escalate to the FOS?

A complaint can be escalated 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 generally applies interest to compensation using a time weighted average of the Bank of England base rate plus 1% for complaints referred on or after 1 January 2026. For complaints referred before that date, it generally uses 8% simple a year. It may direct a different rate in some circumstances, for example where a customer had to borrow money or use money from an account or investment.

What complaints does the new FOS interest rate apply to?

The new FOS interest rate applies to complaints referred to the Financial Ombudsman Service on or after 1 January 2026. Complaints referred before 1 January 2026 remain under the previous 8% simple interest approach, even if the complaint is resolved later.

What is a time-weighted average rate of interest in complaints?

A time-weighted average rate of interest in complaints calculates one average rate for the entire deprivation period (from the date of loss to the date of settlement), based on how long each Bank of England base rate was in effect. This gives a more accurate result than a simple average because longer periods at one rate have more influence on the final figure.

Why does speed matter under DISP complaint handling rules?

Under DISP complaint handling rules, speed is central to treating customers fairly, reducing the risk of escalation to the FOS, and limiting the added cost that delay can create.

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