FSCS announces 2023/24 annual management expenses budget of £99.8m
In addition, the Financial Services Compensation Scheme (FSCS) presents its latest forecasted management expenses for 2022/23 of £89.2m.
Today, FSCS publishes its Budget Update which outlines its proposed 2023/24 management expenses. This includes FSCS’s day-to-day running costs, as well as costs associated with processing claims.
To ensure its service is fully funded, and it can compensate customers as quickly and efficiently as possible, FSCS forecasts an annual management expenses budget for 2023/24 of £99.8m. The total levy for 2023/24, which includes both the management expenses and estimated compensation payments, remains forecast at £478m as announced in November’s Outlook.
The Financial Conduct Authority and Prudential Regulation Authority will be consulting’ on an overall 2023/24 Management Expenses Levy Limit (MELL) of £109.8m. This includes the proposed FSCS’s management expenses budget of £99.8m and an unlevied reserve of £10m. This contingency fund is only invoiced to firms if necessary, for example in the case of a large number of unexpected claims.
Information regarding FSCS’s latest 2022/23 management expenses was also published today. The forecast for the current year now stands at £89.2m - a £6.3m reduction against the budget announced this time last year.
FSCS also announced that it will not be using the £15m unlevied reserve it proposed in January 2022. Any budget surplus (currently £6.3m) will be used to offset the 2023/24 levy and factored into FSCS’s spring Outlook update which will include the latest levy forecast.
For more information on the 2022/23 and 2023/24 management expenses, please see the FSCS Budget Update webpage.
Caroline Rainbird, Chief Executive of FSCS, said:
“Claims-handling infrastructure and support make up the largest part of our proposed management expenses for 2023/24, amounting to £75.9 million or 76% of the total budget. This allows FSCS to carry out its core function, ensuring we are helping customers get back on track as quickly as possible.
“The budget for 2023/24 represents a 5% increase against our budget announced this time last year. This increase relates to a rise in our controllable costs, inflation and resulting price rises. We have however worked hard to keep costs below inflation through careful control of our spending.
“The proposed 2023/24 budget also includes a £3.9m increase in our investment costs which covers essential enhancements to our technology and processes. Although today we have the right teams and systems in place to process claims and make recoveries, the sheer complexity of claims now coming to FSCS means that we are likely to see costs increase over the coming years.
“This means it is critical that we start investing more in our claims handling capabilities now to ensure we can continue providing an efficient service for years to come – one that is both accessible and swift for consumers who are left out of pocket when a firm fails, and cost-effective for the industry that funds us.”
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