The current levy also includes an approximate amount for its management expenses, which includes FSCS’s day-to-day running costs, as well as costs associated with processing claims.
“We continue to monitor our forecasting closely and will keep levy payers informed of any developments that may impact the levy,” it wrote.
“Further updates will also be provided in the spring 2023 outlook.”
Forecasts vs reality
In the report, the lifeboat scheme said the levy for 2022/23 will remain unchanged at £625mn.
The forecast for 2022/23 was first announced last November when the FSCS said it would be £900mn, however, it reduced this by £275mn in May saying there have been fewer self-invested personal pension provider failures and complex pension claims.
The FSCS said the total levy remains as forecast earlier this year and no additional levy is currently expected.
It includes more than £6mn that it expects to recoup from failed firms, as part of its recoveries work.
Any surpluses remaining in each class, at the end of the financial year, will be carried forward and used to offset the 2023/24 levy as well as future costs.
Currently, this includes:
- £91mn in the investment provision class, mainly due to Sipp operator claims now expected in 2023/24;
- £86mn in the life distribution and investment intermediation class, mainly due to fewer claims processed than anticipated for complex pension claims; and
- £26mn across all other classes.
The latest compensation forecast for the LDII class is approximately £223mn – which is approximately £85mn lower than previously forecast.
This is due to:
- Fewer complex pension decisions being issued as the FSCS brought in and trained additional specialist claims handlers
- Macroeconomic impacts including increased interest rates and inflation in the pension redress calculation model which has resulted in lower average compensation payments
- Pension claims put on hold in relation to the FCA consultation regarding calculating redress for non-compliant pension transfer advice
The above factors have resulted in a projected year-end surplus of £86mn which will be carried forward and used to offset the 2023/24 levy.
For the investment provision, the FSCS said it paid out approximately £90mn less compensation in this class than anticipated.
This was mainly due to Sipp operator claims expected in 2022/23, now likely coming to the FSCS in 2023/24.
“Given the likelihood of these claims being with FSCS in the next financial year, the anticipated surplus (£91mn) will be taken forward and used to offset the 2023/24 levy.”
sonia.rach@ft.com
What do you think about the issues raised by this story? Email us on FTAletters@ft.com to let us know
