Outlook November 2021
2021/22 levy update
- The total levy for the 2021/22 financial year is now £717m, which is lower than the previous forecast of £833m announced in May. This is because we now know that we do not need to invoice the retail pool for £116m.
- The retail pool is no longer required this year because the Investment Provision class (PDF 69KB) did not breach its annual levy limit as was expected. Within this class, a number of self-invested personal pension (SIPP) operator failures, that had been expected in this financial year may now occur in 2022/23 or beyond.
- We do not expect to raise any more levies this financial year.
2022/23 levy forecast
- The indicative levy forecast for 2022/23 is £900m. This includes our estimated running costs (management expenses). Please note that this estimation may change and is subject to consultation.
- The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) will carry out consultation on our management expenses in January 2022 and further details will be provided then.
- It is important to note that of the £900m levy currently forecast, circa £400m relates to compensation for failures that have not yet occurred.
- This forecast is based on a number of sources of information about when firms are estimated to fail. This is always difficult to predict, however, and a 20% movement in compensation costs would result in an approximate £90m reduction or increase in the levy.
Our key assumptions behind the 2022/23 levy forecast
- A significant increase in SIPP operator compensation payouts for the Investment Provision class (PDF 69KB).
- An ongoing trend of increasing compensation costs for the Life Distribution and Investment Intermediation (LDII) class (PDF 68KB). This includes an increasing number of complex claims related to pensions.
- Increased compensation costs for the General Insurance Provision class (PDF 69KB) associated with the failures of East West Insurance Company Limited and Gefion Insurance A/S.
- No new legal liability established under section 27 that, if implemented, would lead to an increase in FSCS compensation for SIPP operator claims.
- No new General Insurance Provision (PDF 69KB), General Insurance Distribution (PDF 62KB), Debt Management (PDF 62KB) or Funeral Plan class failures.
Please note: Funeral Plans will be regulated from July 2022 and we are not expecting any failures in the 2022/23 financial year. Newly authorised firms in this class do not pay any levies, including retail pool contributions, in their first year of regulation.
2021/22 latest levy update and 2022/23 forecast
Payment on account
So you can prepare, this is when we will send your 2022/23 invoices:
March 2022: We will invoice the largest 1,000 regulatory fee payers an advance payment (50%) towards the annual levy. This ensures we have enough funds to pay compensation and meet our running costs for the coming year.
Summer 2022: All PRA and FCA regulated firms will be sent an annual levy invoice. For those that made an advance payment in March, this will be deducted from their annual levy.
Please note, although the retail pool is currently predicted to be required for 2022/23, this will not be invoiced as part of the March or summer levies, as was the case with 2021/22. This will be raised later in the year, if required, and when the amounts needed are more certain.
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