On Nov. 18, 2024, UK FSCS issued outlook statement from interim chief executive, confirmed 2024/25 levy of £265m and provided an early indication for 2025/26.
The 2024/25 levy remains unchanged at £265m; compensation costs for the year are now forecast at £372m, slight increase from May forecast of £363m; FSCS expects to recover £33m in 2024/25; confirmed no additional levy expected for this financial year.
Initial forecast for the 2025/26 levy is £394m; expects to pay £367m in compensation, similar to 2024/25; levy is forecast to be higher as FSCS expect lower surpluses to be taken forward.; expects to recover £32m from previously failed firms next year and this has been included in the 2025/26 forecast; recoveries are used to offset the levy.
On May 23, UK FSCS confirmed annual levy for 2024/25 is £265mn.
UK FSCS published latest Outlook including the update on the annual levy for 2024/25, providing indication of the expected compensation costs for year and the industry levy.
Follows UK FSCS Nov. 2023 confirmed unchanged 2023/24 levy £270m, see #190987.
Levy Detail
The total levy payable by firms for the 2024/25 financial year is £265m, lower than the indicative levy announced in Nov. 2023 Outlook and small decrease from 2023/24 levy.
UK FSCS currently expects to pay £363m in compensation during 2024/25, but it also successfully recovered more than £54m from the estates of various failed firms and other relevant parties during 2023/24, helping to reduce the levy payable for 2024/25.
The movement in the UK FSCS latest forecast is mainly driven by two funding classes – Life Distribution & Investment Intermediation (LDII), General Insurance Provision.
The main reasons for the decrease include the reduced average compensation values on pension transfer claims, and expecting to receive fewer new claims in certain areas.
Also on some large insurance payments being delayed because of the complex nature of buildings guarantee insurance claims, and the amounts that were being paid against some previous insurance provider failures, reducing faster than originally anticipated.
Comment
Interim Chief Executive of UK FSCS, Martyn Beauchamp, commented UK FSCS made a number of recoveries in 2023/24, with over £54m recovered from some failed firms.
This has added to surpluses in some funding classes being carried forward, and UK FSCS had therefore used all these surpluses to reduce the levy for 2024/25 to £265m.
In addition, UK FSCS had refined its forecast for the year ahead, learning from what it had seen recently and taking note of persisting trends, which means a reduction in the compensation that it now expects to pay during 2024/25, which now stands at £363m.
Next Steps
The next Outlook will come in autumn, with half-year update and first look at 2025/26.
Nov. 2024 2024/25 and 2025/26 Levies
On Nov. 18, 2024, UK FSCS issued outlook statement from interim chief executive, confirmed 2024/25 levy of £265m and provided an early indication for 2025/26.
The 2024/25 levy remains unchanged at £265m; compensation costs for the year are now forecast at £372m, slight increase from May forecast of £363m; FSCS expects to recover £33m in 2024/25; confirmed no additional levy expected for this financial year.
Initial forecast for the 2025/26 levy is £394m; expects to pay £367m in compensation, similar to 2024/25; levy is forecast to be higher as FSCS expect lower surpluses to be taken forward.; expects to recover £32m from previously failed firms next year and this has been included in the 2025/26 forecast; recoveries are used to offset the levy.
