FSCS confirms unchanged 2023/24 levy of £270m and provides early indication of compensation and levy figures for 2024/25
The Financial Services Compensation Scheme (FSCS) today publishes its latest Outlook including the latest update on the annual levy for 2023/24. It also provides an early indication of the expected compensation costs for 2024/25 and the associated industry levy.
The total levy payable by firms for the 2023/24 financial year remains unchanged as forecast in May 2023 at £270m. No additional levy is expected to be charged to firms for the remainder of the current financial year.
To help firms prepare for the year ahead, FSCS also publishes its first look at the forecast levy for 2024/25, which is £415m. This indicative figure is higher than for 2023/24, primarily due to larger surpluses that were carried over from the 2022/23 financial year which reduced the 2023/24 levy to £270m.
Estimated compensation costs are comparable between the two financial years. For 2023/24, total compensation is estimated at £435m and in 2024/25, FSCS expects compensation to total approximately £457m.
More detail on the compensation forecast for 2024/25
More than 80% of the total compensation forecast relates to pay-outs FSCS expects to make in 2024/25 for firms that have already been declared in default. Less than 20% of the compensation forecast relates to firms FSCS expects to fail in the future.
The expected key drivers behind the compensation forecast for the 2024/25 financial year include:
- investment and pension advice claims, due to firm failures from previous financial years, as well as new firm failures;
- self-invested personal pension (SIPP) operator failure claims; and
- claims and pay-outs for insurance firm failures that occurred in previous financial years.
Martyn Beauchamp, Interim Chief Executive of FSCS, said:
“I am delighted to have recently joined FSCS and to be providing this important update regarding the current compensation and levy figures.
“It is an honour to lead such an important and purposeful organisation.
“FSCS directly contributes to trust and stability in our financial services system and makes a genuine difference to consumers’ lives.
“As the current 2023/24 compensation forecast (£435m) remains broadly similar to May’s Outlook, we do not expect to raise any additional levies in 2023/24.
“Although the levy is expected to increase in 2024/25, due to the lower surpluses carried over from the previous financial year, compensation remains relatively stable.
“For the most recent three years, including the forecast for 2024/25, compensation is between £400m – £460m.
“From a claims perspective, we are seeing recent trends continuing. Most of our compensation continues to be paid out for poor financial advice and for legacy insurance provider failures - both of which include some of the most complex defaults and claims we handle.
“As always, we will keep the industry informed of any changes to our forecasts in a timely fashion. The next Outlook will be published in spring 2024.”
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