Supplementary levies for 2018/19
FSCS to raise supplementary levies on financial services firms in 2018/19
The Financial Services Compensation Scheme announces £516m levy for 2019/20 in its Plan & Budget
The Financial Services Compensation Scheme (FSCS) today publishes its Plan and Budget for 2019/20. The document outlines the Scheme’s expected management costs and latest forecast of potential claims volumes. It also outlines its initial forecasts for the levy financial services firms will pay next year, as well as supplementary levies it will raise on firms before the end of 2018/19.
As forewarned in November, FSCS has decided to raise supplementary levies in 2018/19 mainly because of the rising cost of claims against pension advisers. These supplementary levies fall on firms in the life and pensions intermediary, deposits, investment intermediary, general insurance provision, general insurance intermediation and debt management sectors. The Dial-a-Cab credit union failure and Alpha Insurance failure also contributed to additional supplementary levies on firms in their respective sectors.
FSCS expects to levy the industry £516m for 2019/20 – a 12-month period compared with £468m FSCS levied firms for the nine-month levy year in 2018/19 (from July 2018 to March 2019). The change from a nine to a 12-month period is the main reason for the increase in the levy from the previous year. A levy for 12 months in 2018/19 would have been £574m – £58m higher than the proposed 2019/20 levy.
FSCS’s management budget (i.e. the cost of running the Scheme and of paying claims) will be flat in real terms at £79.6m.
FSCS Chief Executive Mark Neale said: "This is the last FSCS Plan & Budget that I shall introduce as Chief Executive. It is also the first Plan & Budget carrying forward FSCS’s strategy for the 2020s – Protecting the Future – with its four pillars of: prepare, protect, promote and prevent. And the first year in which the recent Funding Review changes, with the new funding classes and provider contribution will take effect, along with an increased limit for some classes.
"One important continuity – which I hope will be welcome to levy payers – is that the increase to our management expense budget remains broadly flat in real terms. This is despite our forecast that claims in that period will rise by around 20% compared to this year.
"One of the priorities in the year ahead will be to work with the regulators and with the industry to bring about improvements in the quality of customer information. This will help us to increase the speed in which we make payments to our customers.
“We recognise, however, that empathy and responsiveness are just as important as speed as we are seeing a continuing rise in complex pensions claims against advisers and against SIPP providers."
FSCS protects consumers when authorised financial services firms fail. It has come to the aid of more than 4.5m people, paying out £26bn since 2001.
Download The Plan and Budget 2019/20. The Scheme will confirm the final levy in April 2019.
Suzette Browne: 020 7375 8633
Bhavik Depala: 020 7375 8631
James Tweed: 020 7375 8646
Notes to editors
- The Financial Services Compensation Scheme (FSCS) is the UK’s statutory compensation scheme for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. FSCS is an independent body, set up under the Financial Services and Markets Act 2000 (FSMA), and funded by a levy on authorised financial services firms. FSCS does not charge individual consumers for using its service.
- Retail pool
|Contribution to retail pool (%)||Retail pool contribution (£m)||Retail pool levy (£m)|
|General insurance intermediation||31%||24||16|
|Home finance intermediation||4%||3||0|
|FCA provider contribution classes|
|Insurers - general||4%||3||3|
|Insurers - life||7%||6||6|
|Home finance providers||5%||3||3|
- FSCS’s new limits (effective from 1 April 2019) can be found in the Plan and Budget on page 8.