Financial professionals

Written by Faheem Pervez

Key developments in 2025

Last year, we noted that the Government's intention to modernise and reform the FOS was something to look out for in 2025. The proposed reforms started to gather momentum in July, with the publication of a consultation paper on 'modernising the redress system.' This closed on 8 October 2025, and we should see further developments in the new year.

This comes in the wake of concerns that FOS' remit has expanded beyond its intended scope. A key change has been proposed to the 'fair and reasonable' test. In brief, if a firm has complied with the FCA's Rules, the FOS will be required to decide that the firm acted fairly and reasonably. This will hopefully provide a degree of consistency, and the introduction of a 10 year 'long stop' date in which to bring a complaint will also be welcomed. However, this does not provide for any additional oversight of FOS, or any restrictions on its ability to handle complex cases that raise (for example) difficult questions of law or fact.

Whether or not the proposed changes lead to greater 'predictability, certainty and transparency' therefore remains to be seen.

Another area of discussion in the paper was the managing of 'mass redress events', which leads us neatly to the FCA's consultation paper on a motor finance consumer redress scheme under s.404 of FSMA, published in October 2025. The scheme follows the Supreme Court decision in Johnson v First Rand Bank [2025]. This is exactly the kind of mass redress event that the 'modernising redress' proposals are seeking to manage but (whilst the scheme will affect lenders rather than brokers) difficulties with adopting a 'one size fits all' approach to a large volume of transactions is likely to be an issue. In particular, it seems hard to justify (as the paper does) a blanket application of s.32 of the Limitation Act on deliberate concealment, along with the inclusion of various presumptions of unfairness.

What to look out for in 2026

It looks like 2026 will finally see a conclusion to the FCA's Advice / Guidance Boundary Review. This follows the publication of a consultation paper on the introduction of targeted support in June 2025. In brief, this would allow firms to provide suggestions for groups of consumers with common characteristics. This would not constitute personal advice and would not take account of individuals' circumstances. The consultation closed in August 2025 and a policy statement is expected in December 2025. Additionally, a consultation paper on simplified advice (which would allow for straightforward, limited advice based on a specific need) is expected in January 2026.

The FCA's hope is that this will help close the advice gap in circumstances where only 9% of persons in the UK receive regulated advice on pensions and investments. However, it remains to be seen how motivated the market will be to offer such solutions, especially as the FCA envisages that targeted support would generally be delivered at no cost. Risks include the need to ensure that targeted support achieves better outcomes – this is a difficult thing to measure in circumstances where broad suggestions are given to large groups of customers. The Consumer Duty will also apply, meaning (amongst other things) that target markets will still need to be carefully identified. Similarly, there are risks with simplified advice. A specific recommendation may seem suitable based on key information provided but this assessment may change if a full review of the customer's circumstances is undertaken.

We anticipate some pressure on firms to provide these solutions, and attention from the FCA if there are problems with implementation. Firms will need to be conscious of the risks to ensure they're not left facing complaints.