New compensation limits and funding review

FSCS’s limit has been raised to £85,000 for more of the financial activities and products it covers. This follows an FCA consultation on FSCS’s funding arrangements.

 

As well as protecting deposits up to £85,000 in banks, building societies and credit unions, these new limits apply:

  • Investment provision is now £85,000 per person per firm, up from £50,000.
  • Investment intermediation is now£85,000 per person per firm, up from £50,000.
  • Life and pensions intermediation is now £85,000 per person per firm, up from £50,000.
  • Home finance intermediation is now £85,000 per person per firm, up from £50,000.
  • Debt management is now £85,000 per person per firm, up from £50,000.
  • Long-term care insurance is now 100%of the claim per person per firm, up from £50,000.

 

Customers of firms that have failed and were declared in default before 1 April 2019 will be covered up to the previous £50,000 limits. The new limits apply to claims against firms that fail on or after 1 April 2019.

 

Levy class limits

Following consultation, the FCA set a limit on the amount that can be levied on each industry sector in a year, by reference to what each class can be expected to afford in a year. The limits are set out in the FCA Handbook and the PRA Rulebook, in both cases at FEES 6 Annex 2.

For the levy year 2019/20, the limits are:

 

PRA classes

  • Deposits: £1,500m.
  • Life and pensions provision: £690m.
  • General insurance provision: £600m.

 

FCA classes

  • General insurance Distribution: £410m (including provider contribution of £100m)*.
  • Investment Intermediation: £330m (including provider contribution of£90m)*.
  • Home Finance Intermediation: £55m (including provider contribution of£15m)*
  • Investment Provision: £200m.
  • Debt management: £20m.
  • Deposit acceptors: £105m (only if the retail pool is triggered).

*Since 1 April 2019, product providers are required to contribute approx. 25% of the levies falling to the FCA intermediation classes, from the first pound.

 

Retail pool

If the levies on a sector exceed the limit for that sector, the excess is levied more widely on the other industry sectors as part of what is known as “the retail pool”. All industry sectors benefit from and contribute to the retail pool (with the exception of deposit acceptors and insurance providers, which only contribute to the retail pool).