Chief Executive's statement - May 2025 Outlook

Reflecting on 2024/25

As discussed in November’s Outlook and detailed further in this report, surplus balances were substantially reduced across all classes during the 2024/25 financial year as they have been mostly utilised offsetting prior levies. The 2025/26 levy will therefore not be offset to the same extent as in previous years. 

Our Annual Report, which will be published in the summer, will include full details of our performance and claims figures for 2024/25, and showcase further examples of our key role in supporting financial stability. The final compensation figures for the year will also be confirmed, and I am pleased to say that levy and compensation figures were broadly in line with our final forecast. 

We continue to refine and improve our forecast models. This has led to greater accuracy in our compensation forecasting, although it will always present a challenge due to the variables involved, including the number of firms declared in default, the likely number of claims for each of these firms, and when these claims are likely to come to us. 

The transition to our new claims service operating model has been implemented effectively and is now embedded into our day-to-day operations. We delivered a high volume of customer claim decisions last year while maintaining our strong customer satisfaction and quality scores, and our aim is to continue this combination of deep purpose and high performance through the 2025/26 financial year. 

As part of our new operating model, I was also pleased to celebrate the first anniversary of our in-house customer contact centre, a change that has brought customer conversations to the very heart of our operation. Our expert team help hundreds of people every day, answering questions about claims and providing reassurance about FSCS protection and how it applies to different financial products. 

Beyond our claims service, there have also been key developments in other product areas. In January, we processed our first direct electronic payments for a deposit taker failure using our new portal, with some customers having their savings back within 24 hours of the firm entering insolvency. 

As well as providing customers with a trusted compensation service, we also have a duty to pursue recoveries from failed firms and relevant third parties that are achievable and cost-effective. We’ve had another strong year of recoveries, much of which has been added to the opening balances in the relevant classes, and some of which will be distributed back to customers through additional payments. This efficient use of resource and hard work in pursuing recoveries puts money back into the financial services sector and to the customers who use it. 

Continuing the progress in 2025/26 

Since our early forecast in November 2024, we’ve reduced the total levy payable by firms for the 2025/26 financial year from £394m to £356m. We now expect to pay £332m in compensation during 2025/26. These reductions reflect two factors in particular: we exceeded forecast on recoveries in 2024/25, and we’re expecting fewer claims in the Life Distribution & Investment Intermediation (LDII) class, with average uphold rates in this class also currently trending lower than historic averages. 

We continue to adjust to the large share of our claims that are considered complex and, as such, require more specialist resource, deeper investigation and typically more time. Over two-thirds of our advice claims are now considered highly complex, up from one third a few years ago. We continue to develop the partnership between our people and our technology to improve customer outcomes. The use of machine learning and natural language processing to ingest large volumes of data, alongside the recruitment and development of data specialists to lead this work, is one example of this partnership.  

Looking further ahead, we’re currently preparing our five-year strategy to 2031. This presents an exciting opportunity for FSCS to bridge purpose and performance over the longer term, maintaining positive outcomes for customers, maximising cost-effective recoveries and becoming more of a strategic partner to the industry that funds our work. I look forward to sharing further details in due course.  

The next Outlook will come in the autumn, featuring a half-year update and a first look at 2026/27. 

Martyn Beauchamp

Chief Executive