Context
FSCS customers have access to the free service due to the annual levy that authorised financial services firms pay. The levy funds the cost of the compensation paid to customers as well as the costs of running the service and processing claims. Fiona Kidy, Chief Financial Officer at the FSCS, has revealed all about their forecasting process and explains why the final levy can end up being quite different to the first forecast.
Key points to note
- The levy forecast is a prediction of the cash needed to process claims and pay the compensation costs for the year in question.
- The forecast contains four main elements, which are reviewed for each funding class:
- compensation costs
- management expenses
- recoveries
- class surpluses or deficits
The FSCS publishes Levy updates every quarter as below:
Next actions
None – for information and awareness