Member Article

FSCS publishes £378m 2017/18 Plan and Budget

The Financial Services Compensation Scheme (FSCS) has published its Plan and Budget for 2017/18, poviding expected management costs and initial forecasts of the levies financial services firms will pay next year.

The FSCS expects to levy the industry £378m, down from £401m in 2016/17. After taking account of the 2016/17 supplementary levies announced today, the total forecast levies are lower than this year.

The levy for general insurers is expected to be significantly lower, but for the life and pension intermediation sector we forecast materially higher costs and a second call on all firms to contribute to these claims. There is an increased levy on the investment intermediation class, but only after allowing for the £50m refund this year.

In addition the Scheme forecasts the interest costs for the outstanding bank legacy loan will be £302m (although the levy will be £100m less due to recoveries against these costs). This is the loan for the cost of resolving Bradford & Bingley in 2008.

Following a spike in claims this year, for next year, the total number of new claims is forecast to fall, but FSCS expects the rising trend in complex claims in the life and pension intermediation sector to continue and expects to levy £171m, exceeding the annual limit for that class and triggering the contribution from all levypayers.

The overall level of FSCS management expenses, the cost of running the Scheme and of paying claims, will be £69m.That’s up £1.8m from this year and reflects the growth in claims since the 2016/17 budget was set. If the costs of out-sourced claims handling are excluded, the budget is falling by £2.7m compared to this year.

FSCS Chief Executive, Mark Neale, says the Scheme stands ready to protect consumers.

“Our Plan and Budget spells out our estimates for the coming financial year. It provides our first indication of the costs and claims we expect. It highlights how FSCS will protect consumers in 2017/18 and the costs of doing so.

“The Financial Services Compensation Scheme is there for people with nowhere else to turn when firms fail. So the £378m indicative levy represents the costs of protecting people. That protection generates consumer confidence and contributes to financial stability.

“The financial services industry funds the protection we provide. We recognise the costs impact on firms, particularly in the light of the supplementary levies announced today, of which we seek to give as much advance warning as possible.

“That’s why we’re concentrating on reducing our overheads and constantly seeking value for money in our work. We’ll continue that drive in the coming year and will also realise benefits from our online claims system.”

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