FOS reform: clarity, consistency, and a 10-year cut-off

The Government has announced a package of reforms to the Financial Ombudsman Service aimed at improving the speed, predictability, and consistency of complaint resolution.

On 16 March 2026, the Government announced significant reforms to the Financial Ombudsman Service (FOS) aimed at delivering faster, more predictable, and more impartial complaint resolution across the financial services sector.

These changes form part of a broader effort to modernise the UK's financial redress framework and rebalance the respective roles of the FOS and the Financial Conduct Authority (FCA).

The reforms

The key reforms can be summarised as follows:

1. A new longstop date, preventing complaints being made more than 10 years after the relevant event (subject to limited exceptions). This adds a layer of certainty for firms when considering their exposure to historic complaints.
2. A formal referral mechanism to the FCA. Where there is uncertainty regarding the interpretation of regulatory requirements, the FOS will be able to refer questions to the FCA before determining a complaint. The intention is that this should ensure consistency between regulatory standards and ombudsman decisions.
3. A change in the "fair and reasonable test" in order to ground FOS decisions more firmly in FCA rules and guidance rather than leaning on a test that can lead to varied outcomes. This addresses the concern that the FOS can effectively create new standards through its' "fair and reasonable" jurisdiction, leading to uncertainty for firms.
4. Greater FCA involvement in systemic issues. The FCA will take a more active role in identifying and addressing widespread or systemic failings, to include industry-wide redress schemes. The FOS will return to its originally intended function of resolving individual disputes quickly and informally, rather than acting as a quasi-regulator.
5. Operational reforms aimed at improving speed and efficiency. The FOS is expected to streamline its processes, reduce backlogs and resolve complaints more quickly. This includes by filtering out weaker claims at an earlier stage.

What does this mean for firms and advisors?

Taken together, these reforms show a shift towards a more structured and predictable redress framework, and a move away from the quasi-regulator role the FOS has, in some instances, been seen to be taking.

For financial advisers, these reforms are likely to sharpen the focus on the evidencing any advice given is in accordance with the applicable Handbook Rules. .

The introduction of a 10-year longstop is likely to be welcomed by advisors, and could have an early impact, particularly for those potentially exposed to historic claims. It should provide a clearer backstop for historic complaints and greater certainty when assessing risk.

The alignment between FOS decisions and the FCA rules is also significant. Firms/advisers may be better placed to defend complaints where they can demonstrate compliance with the regulatory framework in force at the time. This may, in turn, lead to a more robust approach to complaint handling and a reduced inclination to settle marginal claims.

The new referral mechanism to the FCA also has the potential to reduce inconsistent or unpredictable outcomes. However, it could also introduce a further layer of complexity and delay in cases where regulatory interpretation is contested.

Broadly, the reforms reinforce a better division of roles, which should be welcomed. The FCA will retain its role as the rule-setter and overseer of systemic issues, and the FOS will revert to its role as a dispute resolution body focused on individual complaints. This should improve coherence, although it may limit the scope for consumer-favourable interpretations in individual cases.

Conclusion

The proposed reforms represent a significant recalibration of the UK's financial redress system. Whilst the emphasis on speed and efficiency should be welcomed, the more important development is the move towards a more predictable and rules-based framework, with clearer alignment between the FOS and the FCA.

For firms/advisers, this will be a broadly positive shift. However, it remains to be seen how the FOS applies these changes in practice.