FSCS
Printable version

FSCS confirms latest 2021/22 levy forecast of £833m

FSCS yesterday published its latest Outlook report, which confirms its updated levy forecast for 2021/22.

In January’s Plan and Budget, FSCS announced its 2021/22 levy forecast based on its own claims data and projections, as well as input from the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). In light of trends over the past few years, including a rise in pension-related claims, and the anticipated impacts of Covid-19 on the industry at that point in time, FSCS initially forecasted a levy for the year of £1.04bn.

Based on the latest data available, FSCS has now revised its levy forecast for 2021/22 to £833m. This reforecast is £206m lower than the indicative levy announced in January. There are two main reasons for this lower forecast:

  1. Due to the extension of government support schemes, some firms that looked likely to fail this year could now fail in the 2022/23 financial year and beyond.
  2. In 2020/21, FSCS saw lower claims volumes relating to recent insurance failures than had been expected. There are also a number of self-invested personal pension (SIPP) operator claims that we now expect to be paid in 2021/22, rather than in 2020/21. These factors have led to a surplus for the 2020/21 financial year, which has been used to offset the previously forecasted £1.04bn levy.

The £833m levy for 2021/22 represents an increase of £133m compared to the 2020/21 levy (£700m). The increase is due to a number of factors, including higher value pension advice claims in the Life Distribution and Investment Intermediation class, pay-outs for the General Insurance Provision class and failures of SIPP operators in the Investment Provision class, in line with trends FSCS has seen over recent years.

As a number of classes are likely to see more claims than they can be invoiced for in a year, the £833m levy is expected to include £116m for the retail pool. This is a separate pot that other FCA classes are required to contribute to if they have not reached their maximum levy limit, and another class has exceeded its own limit.

Given the ongoing economic uncertainty, and in order not to raise a higher levy than it needs to, FSCS will continue to monitor likely failures and defer invoicing the £116m retail pool until a later point in the year, when the required amount is more certain. We will update on the likely invoicing date for the retail pool as soon as we can, and will give the industry 30 days’ notice before invoices will be issued.

Caroline Rainbird, Chief Executive of FSCS, yesterday said:

“While it may be welcome news to see a lower forecast than announced in January, we do not call this a successful outcome or ‘good news’. There is still a chance that these re-forecasted failures could occur in the years ahead. We also appreciate the levy, even at this updated forecast of £833m, is too high and the cost could put pressure on firms’ finances.

“We are doing all that we can to help reduce the levy and are delaying calling for the retail pool to avoid invoicing for more than we need and to help spread the costs. Ultimately, to deliver a sustainable reduction in the levy over time, all stakeholders, including the industry, need to work together to tackle the root causes of the problem, to help drive better outcomes for consumers and a reduction in the levy.”

Outlook 2021/22, which includes a breakdown of the latest levy forecast for each PRA and FCA funding class, is available on the FSCS website.

Media enquiries

Email: publicrelations@fscs.org.uk
Anthony Ozimic | t: 020 7375 8638 | m: 07939 177683
James Tweed | t: 020 7375 8646
Suzette Browne | m: 07500 842747

Notes to Editors

Read more about the remit of FSCS on our Notes for editors page.

 

Channel website: https://www.fscs.org.uk/

Original article link: https://www.fscs.org.uk/media/press/2021/may/fscs-confirms-21-22-levy-forecast/

Share this article

Latest News from
FSCS

Are you wasting budget on cyber training?