Management expenses update

2019/20 approved budget

FSCS management expenses for 2019/20 are £74.6m, as set out in the Plan and Budget.

The PRA and FCA have set the FSCS Management Expenses Levy Limit (MELL) at £79.6m, which allows for an unlevied reserve contingency of £5m. The policy statement was published on 29 March 2019 and is available here.

This budget is flat in real terms and represents an increase of £1.9m (2.4%), compared to the 2018/19 management expenses budget. The main factors bearing on the budget are:

 

Outsourced claims handling – decrease of £2.6m:

  • Despite increasing SIPP and pensions claim volumes (£3.9m in associated cost), efficiency savings generated by our partnership with a sole outsourcer partner are expected to yield £6.5m of reduced claims processing costs.

 

Internal claims handling support costs:

  • Despite increasing SIPP and pensions claim volumes (£3.9m in associated cost), efficiency savings generated by our partnership with a sole outsourcer partner are expected to yield £6.5m of reduced claims processing costsDespite increasing SIPP and pensions claim volumes (£3.9m in associated cost), efficiency savings generated by our partnership with a sole outsourcer partner are expected to yield £6.5m of reduced claims processing costs.

 

Core Support – a £2.6m increase:

  • We will invest in business-critical skills, including a small increase in headcount, strengthening FSCS operations and ensuring preparedness when responding to claims.
  • This will include investment in payments, finance and sanctions processes and investment in IT, in particular cyber-security.
  • Investment to support early work on our Prevent strategic pillar.

 

Provisions for the UK’s exit from the EU, uncrystallised failures and VAT (increase of £0.6m):

  • This includes a contingent provision for a range of eventualities, including uncrystallised firm failures, a potential VAT liability on insurance claims handling and the UK’s exit from the EU.

 

2018/19 update

Our latest forecast for management expenses for 2018/19 was £74.2m against a budget of £72.7m. This reflected increased outsourced claims processing costs mainly because of higher than expected Life & Pension advice volumes.

Consequently, we expected to need to access up to £1.5m of unlevied contingency reserve included within the MELL set by the PRA and FCA. We notified the PRA and FCA accordingly. In the event we incurred an additional £1.46m.

The management expenses budget can be found in the Tables section.