The Financial Services Compensation Scheme (FSCS) has announced that its 2023/24 annual management expenses budget will be £99.8m.

This budget includes FSCS’s day-to-day running costs, as well as costs associated with processing claims.

According to the statutory body, it can ensure its service is fully funded and can compensate customers as “quickly and efficiently as possible”.

The total levy for 2023/24, which includes both the management expenses and estimated compensation payments, remains forecast at £478m as the FSCS announced in its November Outlook.

Information regarding FSCS’s latest 2022/23 management expenses has also been published today, with the forecast for the current year now standing at £89.2m, a £6.3m reduction against the budget announced this time last year.

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) will be consulting on an overall 2023/24 Management Expenses Levy Limit (MELL) of £109.8m. This includes the proposed FSCS’s management expenses budget of £99.8m and an unlevied reserve of £10m. This contingency fund is only invoiced to firms if necessary, such as in the case of a large number of unexpected claims.

“Claims-handling infrastructure and support make up the largest part of our proposed management expenses for 2023/24, amounting to £75.9m or 76% of the total budget,” said chief executive of the FSCS, Caroline Rainbird. “This allows FSCS to carry out its core function, ensuring we are helping customers get back on track as quickly as possible.

“The budget for 2023/24 represents a 5% increase against our budget announced this time last year. This increase relates to a rise in our controllable costs, inflation and resulting price rises. We have however worked hard to keep costs below inflation through careful control of our spending.”

Rainbird added that the proposed 2023/24 budget also includes a £3.9m increase in the body’s investment costs, to cover enhancements to technology and processes.

“Although today we have the right teams and systems in place to process claims and make recoveries, the sheer complexity of claims now coming to FSCS means that we are likely to see costs increase over the coming years,” she said.

“This means it is critical that we start investing more in our claims handling capabilities now to ensure we can continue providing an efficient service for years to come – one that is both accessible and swift for consumers who are left out of pocket when a firm fails, and cost-effective for the industry that funds us.”

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