The PRA and FCA have set out the proposed management expenses levy limit for the Financial Services Compensation Scheme for 2024/25 in consultation CP1/24.
The MELL is made up by the management expenses budget, which is the budget for the operational work of the FSCS, as well as an unlevied reserve.
The management expenses budget covers the FSCS’s ongoing operating costs and consists of controllable costs (costs which are not sensitive to changes in volume), volume and complexity driven costs (costs sensitive to changes in claim volume and type), and an investment budget, which the FSCS defines as costs required to deliver on its statutory objectives, priorities, and strategic ambition. The unlevied reserves allows the FSCS to raise additional funds at short notice, without further consultation, to meet costs that were not foreseen when the management expenses levy was set.
The proposed MELL for 2024/25 is £108.1 million, down £1.7 million on last year.
The management expenses budget for 2024/25 is £103.1 million, up 3.3% from the 2023/24 budget of £99.8 million. The consultation outlines that the proposed increase is due to a new operating system for FSCS which requires 65 new members of staff, and that the FSCS have taken steps to cut costs in other areas to keep the increase to a minimum.
The unlevied contingency reserve is dropping from £10 million to £5 million. The unlevied reserve has come down in recent years after being raised to £15 million in 2021 due to the uncertainty of the pandemic and need to prepare for unplanned for work.
The MELL will apply from 1 April 2024, the start of the FSCS’s financial year, to 31 March 2025.
The BSA considered the proposals and responded to this consultation. You can find a copy of our consultation here.