FSCS management levy to total £72.7m

FSCS management levy to total £72.7m

Advisers can expect to help shell out £72.7m in 2016 to 2017 to provide suitable funding for the Financial Services Compensation Scheme so that it can carry out its duties.

According to a consultation paper issued by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) on Monday (19 January), the proposed management expenses levy limit is £72.7m – down slightly on 2015 to 2016.

The figure is broken down into £67.4m for the proposed management expenses budget – down 2.5 per cent on 2015 to 2016, and a proposed contingency reserve for 2016 to 2017.

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The proposed contingency reserve is the same as it was in 2015 to 2016 – £5.3m – and remains unchanged since 2014 to 2015.

In the 17-page consultation paper, titled Financial Services Compensation Scheme – Management Expenses Levy Limit 2016 to 2017, the regulators outlined the reasons for the management expenses levy limit.

The regulators stated that the management expenses levy limit represents the maximum amount the FSCS can levy in order to fulfil the obligations imposed on it by the PRA and FCA rules.

The full the management expenses levy limit is not necessarily the amount the FSCS will levy in the coming year, but covers ongoing operating expenses, such as IT, outsourcing and claims handling.

According to the consultation, the costs also include the FSCS’s five-year strategic change costs.

Closing date for the FSCS management expenses levy limit consulation is 15 February 2016.

Chris Hannant, director general at the Association of Professional Financial Advisers, said it was encouraging that the management expenses levy was down overall and heading in the right direction.

He said: “The chances of an interim levy next year are very low under the new method of calculating levies, which is collected on the basis of pre-year rolling average. It leaves quite a lot of headroom for unexpected events.

“Although the levy is still disappointingly high the outlook is getting a bit brighter on the basis of what we know.”