On 16 January 2020, the PRA and FCA co-published a consultation paper setting out proposals for the management expenses levy limit (MELL) for the Financial Services Compensation Scheme (FSCS) for 2020/21.

The proposed MELL is £83.2 million for 2020/21, consisting of a management expenses budget of £78.2 million and an unlevied contingency reserve of £5 million. The proposed MELL would apply from 1 April 2020, the start of the FSCS’s financial year, to 31 March 2021.

The management expenses budget covers the FSCS’s ongoing operating costs and includes the FSCS’s IT, staff, outsourcing, legal and claims handling costs. The proposed £78.2 million is an increase of 4.8% over the 2019/20 management expenses budget of £74.6 million published in March 2019. 75% of the increase can be attributed to a forecast rise in the volume and complexity of claims expected by the FSCS. The FSCS also forecasts that it may need to utilise the contingency reserve in the 2019/20 financial year to cope with a rise in the volume of complex claims.

The deadline for comments on the consultation paper is 17 February 2020. Following a consideration of the responses, the PRA will issue a policy statement and the FCA will issue a Handbook Notice so that the final rules can be in place for the start of the FSCS’s financial year on 1 April 2020.