The FOS said it would deliver the “biggest reforms” to its service since it started, noting that it had kept the cost to businesses flat for the last two years.
The government announced that the FOS would be reformed to prevent it from acting like a quasi-regulator and return it to its original purpose as a “simple, impartial dispute resolution service”.
In its proposal, the FOS said the suggested costs would still represent a “significant saving” on 2023/24 levels, as it continued to focus on “efficiency savings”.
It proposed raising the charges for professional representatives from £250 to £260, with the credit if the case is found in the favour of the complainant rising from £175 to £180.
The FOS is also consulting on increasing its case fee from £650 to £680, adding that this was lower than the 2023/24 levels, when the case fee was £750. Additionally, it has suggested raising the compulsory jurisdiction levy from £70m to £86m, which would again be lower than the level of £110m in 2023/24.
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The organisation said the financial services landscape had changed “significantly” since the service was set up 25 years ago and said it was the right time to transform the redress scheme and how it operated to “reflect a modern economy”.
It said it expected reforms to take place over the next two financial years, and the cost is anticipated to be around £8m.
The FOS expected case volumes to fall by around a third or 100,090 annually for 2024/25, due to fewer cases regarding motor finance commission.
It also wants to reduce demand from 209,000 complaints in 2025/26 to 188,000 in 2026/27, but said there was uncertainty as new products were expected to come into its remit.
The FOS is budgeting to resolve 245,000 complaints in 2026/27, 10,000 more than in 2025/26.
Including transformation costs, the FOS expects its total costs for 2026/27 to be £260m, lower than its latest forecast of £273m for 2025/26.
Further, the organisation announced it would simplify its billing process by replacing the free case allowance with a monetary value of £2,000 for both respondent businesses and professional representatives. Also, it will introduce quarterly billing for the largest businesses that are expected to account for the most cases.
Jenny Simmonds, interim chief executive of the FOS, said: “We are delivering a series of improvements to focus on our core purpose as a quick, informal and impartial alternative to the courts, now and in the future, helping to build confidence in financial services.
“As we consult on our plans and budget for 2026/27, we want to lay the foundations for an agile, responsive and modern Financial Ombudsman [that] is fit for the future and has the confidence of consumers and financial businesses alike. The next year will be a crucial one for our service and we welcome views from stakeholders on our proposals.”
