FSCS announces 2022/23 annual management expenses budget of £95.5m
In addition, the Financial Services Compensation Scheme (FSCS) presents its latest running costs for 2021/22 of £85.3m.
FSCS today publishes its Budget Update, which outlines its anticipated management expenses (running costs) for the following financial year.
To meet its running costs and ensure it can help its customers get back on track as quickly as possible, FSCS anticipates needing annual management expenses of £95.5m. The total levy (including both management expenses and compensation costs) for 2022/23 remains forecast at £900m as announced in November’s Outlook.
The Prudential Regulation Authority and Financial Conduct Authority are consulting on an overall Management Expenses Levy Limit (MELL) of £110.5m. This includes the FSCS’s management expenses budget of £95.5m and an unlevied reserve of £15m. This contingency fund (£15m) is only invoiced to firms and used if necessary.
Information regarding FSCS’s latest 2021/22 management expenses was also published today. The forecast for the current year now stands at £85.3m - a £5.2m reduction against the budget announced this time last year. FSCS also announced that it does not expect to use the £15m unlevied reserve it proposed in January 2021 and will not be invoicing firms for this.
Any budget surplus (currently £5.2m) will be used to offset the 2022/23 levy for financial services firms and will be factored into the FSCS spring Outlook publication.
For more information on the 2022/23 and 2021/22 management expenses, please see the Budget Update webpage.
Caroline Rainbird, Chief Executive of FSCS, said:
“A key driver behind the expenses we are anticipating for 2022/23 is an ongoing trend in more complex claims with higher processing costs. Of particular note is an increasing number of claims coming through from customers who were given poor advice to move their pensions into unsuitable investments. These claims cost us more to process as they have longer handling times and require specialist staff to assess them and calculate the necessary compensation. In the financial year to date, we have made over 9,000 requests to firms as part of gathering the supporting evidence needed for these claims. This is an 80% increase on the same time last year and a four-fold increase on 2018/19.
“As well as more pension-related claims, we are seeing more individual firm failures that are associated with multiple financial products which are also complex to process.
“We are doing everything within our power to keep our costs down, including making strategic choices to reduce spend across the business and keeping the rise in our controllable costs below 3%. That said, it is important for the industry to be aware that despite our efforts, the sheer complexity of claims means we will likely see a rise in our management expenses over the coming years.”
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Notes for editors
For more information about the role of FSCS see our Notes for editors page.