On 15 July 2025, the Financial Ombudsman Service (FOS) issued a Policy Statement on interest on compensation awards.

In the Policy Statement the FOS sets out its revised position on interest applied to compensation awards.

In summary, the revised position provides that:

• Consumers who are able to demonstrate an actual loss from their complaint will not be impacted by the changes in the Policy Statement. Actual losses will be considered in the primary compensation award, ensuring the complainant is restored to their original financial position.
• The FOS will continue to apply interest to compensation awards. However, it will change the interest rate to a time-weighted average of the Bank of England base rate plus one percentage point. This new rate will generally apply to the period from when the complainant was unreasonably deprived of the money, to the payment deadline date set by the FOS for paying compensation to the complainant. The interest will be applied on a simple basis.
• The 8% interest rate will be retained for late payment of awards. Respondent businesses will be expected to apply a fixed 8% interest rate to the period from the deadline date set by the FOS for paying compensation to the complainant, to the actual date the compensation payment is made to the complainant. This interest will also be applied on a simple basis.

Next steps

The FOS intends to implement these changes from 1 January 2026, for all complaints submitted to it from that date onwards. However, the FOS will confirm this implementation date in due course. It will also provide detailed guidance, case studies and calculations to stakeholders before the confirmed implementation date.