Context
FSCS Chief Executive, Caroline Rainbird, introduces the FSCS January 2023 Budget Update which covers the proposed 2023/24 FSCS management expenses budget and the latest forecast for 2022/23.
Key points to note
The Budget Update provides information regarding the FSCS’ proposed management expenses, which are consulted on each year by the FCA and PRA via the Management Expenses Levy Limit (MELL).
To meet its running costs, and ensure customers are helped to get back on track as quickly as possible, the FSCS is proposing a management expenses budget of £99.8m – a 5% increase against their budget announced this time last year.
This proposed budget includes a year-on-year reduction in volume-related costs, as claims volumes are expected to remain broadly at the level they are now, which is lower than forecast this time last year. However, the reduction is offset by an increase in controllable costs due to inflation and the resulting price rises. Through very careful control of its spending, FSCS has kept the increase in controllable costs to below inflation – at less than 6%.
In addition, FSCS recoveries work plays an important role in reducing the levy it needs to raise from the industry. Between April and December 2022, £4.1m was recovered. Of this, £2.5m has been paid to customers who had losses greater than the compensation limits, and the balance at the end of the year will be used to offset levies in the relevant funding classes.
The FSCS’ forecasted running costs for 2022/23 now stand at £89.2m which represents a £6.3m reduction against the budget announced in January 2022. This is the result of FSCS processing fewer claims than expected, primarily in the Life Distribution and Investment Intermediation and Investment Provision classes. Overall, the FSCS expect to make 13,600 fewer claims decisions this year compared to its initial forecast.
Next actions
None – for information and awareness.