On 16 January 2020, the Financial Services Compensation Scheme (FSCS) published its Plan and Budget 2020/21. The Plan and Budget is led by the FSCS’ strategy for the 2020s, which is now in its second year following its launch in November 2018.
The Plan and Budget 2020/21 sets out the progress that has been made on the Strategy for the 2020s based on the four pillars of prepare, protect, promote and prevent. It also addresses some key challenges the FSCS will face including: continuing vulnerability of customers, rising customer expectations, a higher number of firm failures and a growing number of complex claims, an increased choice of financial products, a faster pace of technology change and the need to keep personal data secure.
In terms of the FSCS budget:
- a budget of £78.2m for 2020/21 represents a 1.3% increase on the latest full year forecast for 2019/20 of £77.2m. There is a £2.1m increase in costs not directly impacted by changes in claims volumes, driven by continued investment in business-critical skills and increased recovery costs, which is offset by a decrease of £1.1m in internal claims processing costs. The budget for 2019/20 was based on processing 23,400 claims but the FSCS is forecasting to process 27,200 through to the end of 2019/20. The FSCS’ expectation is that approximately the same level of claims will be received in 2020/21; and
- a proposed 2020/21 indicative levy is £635m, an increase of £87m from the levies raised in 2019/20. The overall increase is due to increasing SIPP operator claims, which continues the rising trend of pension-related cases, and the investment provider class is forecast to reach its annual limit, which will trigger the retail pool for these costs. The FSCS will keep this under review and provide an update during the year.