Context
Following a September 2021 article about how the FSCS forecasts the levy, Fiona Kidy, FSCS Chief Financial Officer, explains how the class contributions work, what the retail pool is and when the FSCS needs to use it.
Key points to note
The annual levy has many moving parts (see the link above for more background information), one of which is the retail pool levy. The FSCS is keen to shine a light on the retail pool to further educate stakeholders on how the current arrangements work.
The retail pool, a cross-subsidy if a funding class breaches its limits, has been used in two out of the last four financial years. In the 2020/21 financial year, a retail pool of £44m was called upon and in the 2018/19 financial year, the amount was £78m. The current FSCS forecast doesn’t expect to need the retail pool in 2022/23 or 2023/24. However, if there were big changes in certain funding classes, it could still be that FSCS would need the retail pool in those years.
The retail pool has also been in the news recently, as the (FCA) published its feedback to its call for input on the Compensation Framework Review.
The article explains the nine ‘funding classes’ (three PRA and six FCA), provides information about the retail pool, sets out the retail pool approach (with examples) and considers the future of the retail pool.
Next actions
None – for information and awareness.