FSCS confirms latest 2023/24 levy forecast of £270m
The Financial Services Compensation Scheme (FSCS) today publishes its latest Outlook update, with revised compensation and levy forecasts for 2023/24.
In November’s Outlook, FSCS published an early levy forecast for 2023/24. This forecast considered the trends of the past few years, the anticipated impact of firms that have already failed, and projections based on when future failures were expected to occur.
Latest Outlook update
FSCS has revised its levy forecast for 2023/24 to £270m. Whilst this is a reduction from the initial estimates we shared in November 2022, we still expect to pay £471m in compensation during 2023/2024 – the sixth year in a row that compensation costs are close to or above £500m.
The 2023/24 forecast levy has reduced due to:
- An increased surplus from the 2022/23 levy being carried over into 2023/24, which has reduced the amount of money FSCS needs to raise to cover compensation costs. These surpluses materialised because of lower volumes of pensions decisions, revised SIPP operator claim timings and large insurance pay-outs being delayed or settled at lower amounts.
- An overall decrease to the compensation forecast for 2023/24 of £121m, but we still expect to pay £471m. The decrease includes a £67m reduction in the Investment Provision class, mainly due to fewer SIPP operator claims now expected this year. It also includes a £56m reduction in the General Insurance Provision class, partly due to delays on large loss claims.
FSCS continues to see increasingly complex firm failures, for example within the SIPP operator, ongoing claims management of insurance estates and defined-benefit pension advice areas. These can take significant time and expertise to investigate, and often rely on third parties providing information. The overall process can take many months to resolve. These claims can also be high value and compensation relating to these claims can be spread over multiple financial years.
Caroline Rainbird, Chief Executive of FSCS, said: “The levy enables FSCS to continue to provide a trusted compensation service that helps build confidence in the financial services industry, particularly during economic and market volatility.
Whilst the level of compensation expected this year is lower than it has been in some recent years, this is the sixth year in a row that compensation costs are close to or above £500m.
“We will continue to closely monitor the volume and complexity of claims throughout the year and will share our next update on the levy in the autumn edition of Outlook.“
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