Outlook May 2022
2022/23 levy update
- The annual levy for 2022/23 is now £625m, this is lower than the indicative levy announced in Outlook in November 2021, and a decrease from the final 2021/22 levy which was £717m.
- Although the levy forecast has decreased, we still expect compensation costs in 2022/23 to be higher than for 2021/22. We will publish final figures for 2021/22 in our Annual Report in the summer.
- A retail pool levy will not be required in 2022/23 as we no longer expect the Life Distribution & Investment Intermediation (LDII) class to breach its annual levy limit and require additional funding.
- We expect to pay compensation to customers who had experienced losses from over 1,000 different firms which failed in previous years.
The updated levy is currently driven by:
- A £128m decrease against forecast in compensation paid to customers in 2021/22 resulted in surpluses being carried forward into 2022/23. The majority of this decrease was due to:
- a £54m reduction in compensation paid in the LDII class due to fewer complex pension claims being received than previously forecast;
- a £14m reduction in compensation paid in the Investment Provision class due to fewer SIPP operator failures than previously forecast; and
- a £56m reduction in compensation paid in the General Insurance Provision class. Some of these claims decisions are now expected in 2022/23, primarily in relation to East West Insurance Company Ltd.
- A decrease of £162m in compensation forecasted for 2022/23, the two classes with the biggest decrease are:
- the LDII class with a £65m reduction due to fewer claims decisions expected for complex pension claims; and
- the Investment Provision class with a £99m reduction due to fewer SIPP operator failures than expected.
Compensation costs for 2022/23 are still expected to be higher than in 2021/22. We continually review our underlying assumptions as these are affected by when firms fail and the timing and complexity of claims.
Outlook provides our latest update for the 2022/23 financial year; we will publish the next version later in the year.
- The 2022/23 financial year will be the first year of the Funeral Plans funding class.
- From 29 July 2022, the Financial Conduct Authority (FCA) will start regulating firms and intermediaries that provide and arrange pre-paid funeral plans.
- In 2022/23 we are not expecting any firm failures in the newly regulated market or compensation costs in this class.
- Newly authorised firms do not pay any levies in their first year of regulation and therefore firms in this class will not be required to pay an annual levy in 2022/23.
Payment on account
Summer 2022: All PRA and FCA regulated firms will be sent an annual levy invoice.
We have already invoiced firms £269m for payment on account for the 2022/23 levy. For those that made an advanced payment in March 2022, this will be deducted from their annual levy invoice in the summer.
Full Outlook report and The balancing act of compensation report
We'd love to hear what you think about how we're presenting this information. Please share your thoughts or suggestions with us here.
If you would like Outlook in an alternative format, please contact us.
Read older editions of Outlook in our Outlook archive.