Plan and Budget
FSCS Plan and Budget outlines expected management costs and the latest forecast of potential claims volumes. Also outlined are initial forecasts for the levy financial services firms will pay next year, as well as any supplementary levy that may be due.
FSCS Plan and Budget 2020/21
Welcome to the most recent FSCS Plan and Budget, where we outline expected management costs and detail the latest forecast of potential claims volumes.
Download the latest Plan and Budget - pdf (0.5MB)
Chief Executive’s Overview - Caroline Rainbird
I am delighted to introduce my first Plan and Budget as FSCS Chief Executive. The past eight months since joining FSCS, have left me very impressed by the strength of FSCS as an efficient and effective compensation scheme, delivering an empathetic service for consumers, many of whom are vulnerable. We are able to do this by working in partnership with the financial services industry and the regulatory family.
We are confident that this Plan and Budget 2020/21 provides FSCS with the means to build on our strengths and meet the challenges the financial services industry and consumers will face throughout the coming year. It sets out progress that has been made on our Strategy for the 2020s based on the four pillars of Prepare, Protect, Promote and Prevent. It also addresses some key challenges FSCS will face including: continuing vulnerability of customers, rising customer expectations, a higher number of firm failures and a growing number of complex claims, an increased choice of financial products, a faster pace of technology change and an ever-critical need to keep personal data secure. We are seeing many of these challenges starting to really impact upon our customers as well as levy payers.
Strategy for the 2020s Update
This pillar has delivered a number of improvements driven by engagement across FSCS and our partnership with Capita. For example, following the recent failure of one credit union, we issued compensation to customers on the same day the firm failed. Other improvements are being delivered through regular exercising for deposit and life insurance failures, data centre backup plans and crisis scenarios. Our ongoing programme of testing and exercising ensures that we are more prepared than ever to serve our customers when they need us most.
The increased operational capacity and capability of recent months is now delivering consistent performance, resulting in improved customer outcomes. We continue to work with our partner Capita to embed a continuous improvement culture that drives productivity and quality resulting in, amongst other measures, enhanced operational efficiency. Our Service Design programme has started delivering great benefits to our customers which has positively impacted upon customer satisfaction and quality measures.
We have seen a strong increase in prompted awareness of FSCS from 29% to 33% and broader awareness of FSCS or deposit protection remaining high at 79%. We are continuing to be proactive by treating each failed firm as a customer campaign, as well as thinking about the types of customers we might encounter and what their specific needs may be. Working with industry we have developed guidelines for the life and pensions sector to adopt the FSCS badge and supported mystery shopping across the industry, improving awareness and understanding of FSCS. We have carried out a proactive engagement campaign with MPs and journalists following our Treasury Select Committee appearance in July 2019 and are now targeting the new cohort of MPs.
The Prevent pillar has made good progress since April 2019 and we have worked with our regulatory partners to establish new ways of working. This is seen most prominently with our anti-phoenixing work – where the Financial Conduct Authority, the Financial Ombudsman Service, the Insolvency Service and FSCS are coordinating efforts to prevent future harm to consumers and the industry as a whole. Since September 2019, our claim handlers have picked up 19 potential cases of phoenixing which have been shared with the Financial Conduct Authority. A further 117 separate cases have been identified, leading to them being referred to the Financial Conduct Authority. Additionally, with FSCS’s assistance, seven firms withdrew their applications once the Financial Conduct Authority discussed concerns over phoenixing with them.
London Capital & Finance (LCF):
On 9th January 2020, following a thorough factual and legal analysis, we announced that FSCS will pay compensation to some LCF investors and will start to review advice claims in the first quarter of 2020. At this stage, it is too early to predict the full impact on the levy.
The budget of £78.2m for 2020/21 represents a 1.3% increase on the latest full-year forecast for 2019/20 of £77.2m. There is a £2.1m increase in costs not directly impacted by changes in claims volumes, driven by continued investment in business-critical skills and increased recovery costs, which is offset by a decrease of £1.1m in internal claims processing costs.
The budget for 2019/20 was based on processing 23,400 claims but we are forecasting to process 27,200 through to the end of 2019/20. Our expectation is that approximately the same level of claims will be received in 2020/21.
Levy – indicative 2020/21
The proposed 2020/21 indicative levy is £635m, an increase of £87m from the levies raised in 2019/20. The amounts that each class will pay i.e. including all provider and retail pool contributions are shown on p.10.
The overall increase is due to increasing SIPP operator claims, which continues the rising trend of pension-related cases, and the investment provider class is forecast to reach its annual limit, which will trigger the retail pool for these costs. We will keep this under review and provide an update during the year.
In summary, the financial sector faces many changes and challenges as we enter the third decade of the 21st century. Claims are forecast to continue to rise, and we are already experiencing higher claims costs due to the complexity of cases being submitted, which in turn will have a direct impact on the levy for the coming year. We recognise the importance of remaining focused, well-resourced and prepared for these challenges, as well as continuing to deliver an efficient, effective and empathetic service. We are confident our Plan and Budget 2020/21 provides us with the resources and strength to meet these demands in the interests of all our stakeholders.
Download the Plan and Budget – pdf (0.5MB)
If you do not already have the Adobe Acrobat Reader installed on your computer, you can download it from the Adobe website. Alternatively, please ask us for a free copy of Plan and Budget to be sent to you by post.
These publications are available in different languages as well as in braille, large print, and as a recording.
Older editions of the Plan and Budget are available via the archive link below.