The Financial Services Compensation Scheme (FSCS) has proposed a management expenses budget of £103.1m for the 2024/25 financial year.

For the total levy for 2024/25, which includes both the FSCS’ management expenses and estimated compensation payments, the scheme confirmed that this will remain unchanged at £270m, as forecast in November’s outlook.

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are consulting on an overall 2024/25 management expenses levy limit of £108.1m, which includes a core budget of £103.1m and an unlevied reserve of £5m.

This reserve, which is £5m less than proposed in January last year, has now returned to its pre-pandemic level. In the previous three financial years, the reserve was higher due to elevated levels of uncertainty around firm failure.

“Complex claims and enquiries now make up the majority of FSCS’ work,” said interim chief executive at the FSCS, Martyn Beauchamp. “To ensure we’re best positioned to handle these claims, we’ve made a strategic decision to increase our in-house expertise going forward. This transition is a key focus for us and will mean additional costs during 2024/25.

“We’ve partially offset the costs of this work through savings across the business, by carefully prioritising and making efficiencies where possible. Overall, this has meant a forecast rise in our management expenses of 3%, which is below the level of inflation.”

The FSCS forecast for its management expenses in the current year currently stands at £99.7m, approximately £0.2m less than expected when the scheme first announced the budget in January 2023.

Any surplus budget at the end of the financial year will be used to offset the 2024/25 FSCS levy.

Beauchamp added: “We expect to pay a significant amount in compensation during the next year, helping our customers get back on track as soon as possible and directly contributing to public confidence in the UK financial services industry.”

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