Statement on FSCS’s management expenses budget 2016/17
FSCS announced on 16 January supplementary levies totaling £114 million to help meet higher than expected compensation costs for 2016/17. On the same day, we stated in our published Plan and Budget, that we expected to use part of the unlevied contingency reserve, included within the management expenses levy limit (set by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) at the start of this year), to cover higher claims handling costs, mostly for Enterprise Insurance, Gable Insurance and SIPP-related claims.
We forecast that we will need another £5.7m this year but have offset savings made in other areas against these forecast costs, reducing significantly the amount we need from the reserve.
We have absorbed £3.7m of extra costs so will seek between £1m and £2.5m from the reserve, depending on the claims costs to the year-end. We do not intend to raise any extra levies in 2016/17 for these costs but shall recover the amounts in 2017/18 instead. We have written to the PRA, FCA and trade bodies accordingly.
We continue to monitor costs and claims forecasts closely and will report any changes that are likely to have an impact on the industry.