Context
Following a consultation earlier this summer, FOS has confirmed changes to the interest rate applied to the compensation awarded to consumers.
Key points to note and next actions
- FOS considered a range of interest options after feedback from its joint Call for Input with the FCA suggested the rate should be reviewed. The previous rate of 8% had remained unchanged for nearly 25 years despite significant shifts in the economic landscape and interest rate environment.
- The interest applied to some awards is being revised to track the Bank of England’s base (average) rate +1%. There was a significant majority of support from this option compared to the other potential options considered in the Consultation.
- This will be calculated as a weighted average over a period from when the money was due (i.e. when the loss to the consumer occurred) until the date the redress payment is made.
- Awards will still reflect any actual losses the consumer has suffered, as now.
- FOS is aiming to introduce this change from 1st January 2026 for new complaints referred to it from that date, but will confirm plans for implementation in due course. Further details will be published in the autumn, alongside wider proposals to modernise the redress system.