The Financial Services Compensation Scheme (FSCS) has revised its levy forecast for 2023/24 to £270m.

This is a reduction from the initial estimates by the FSCS last November, although it still expects to pay £471m in compensation during 2023/24. This will mark the sixth year in a row that compensation costs are close to or above £500m.

Last November, the FSCS published its outlook with an early levy forecast for 2023/24. This forecast considered the trends of the past few years, the anticipated impact of firms that have already failed, and projections based on when future failures were expected to occur.

However, the FSCS has now revealed it has reduced its forecast levy due to an increased surplus from the 2022/23 levy being carried over into 2023/24, which has reduced the amount of money the scheme needs to raise to cover compensation costs. These surpluses materialised because of lower volumes of pensions decisions, revised SIPP operator claim timings and large insurance pay-outs being delayed or settled at lower amounts.

The FSCS stated that the levy forecast is also down due to an overall decrease to the compensation forecast for 2023/24 of £121m, although it still expects to pay £471m. The decrease includes a £67m reduction in the investment provision class, mainly due to fewer SIPP operator claims now expected this year. It also includes a £56m reduction in the general insurance provision class, partly due to delays on large loss claims.

Chief executive of the FSCS, Caroline Rainbird, commented: “The levy enables FSCS to continue to provide a trusted compensation service that helps build confidence in the financial services industry, particularly during economic and market volatility.

“Whilst the level of compensation expected this year is lower than it has been in some recent years, this is the sixth year in a row that compensation costs are close to or above £500m.

“We will continue to closely monitor the volume and complexity of claims throughout the year and will share our next update on the levy in the autumn edition of outlook.”

Share Story: