Lower FSCS levy due to cost cutting: report

Lower FSCS levy due to cost cutting: report

Cost cutting at the Financial Services Compensation Scheme was behind the lower industry levy for the body’s management expenses, the Financial Conduct Authority has said.

The £72.7m levy for 2016/17, announced in January when the regulator launched a consultation on the proposal, was £1.7m lower than in the previous year.

In its policy statement on the FSCS management expenses levy limit, the FCA said a number of people contacted the regulator to find out what savings the compensation scheme was making.

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It said: “The FSCS’s running costs are largely determined by the volume of claims for compensation and any statutory or other mandatory requirements.

“However, the FSCS is committed to reducing costs over the remaining three years of its current five-year strategic change programme through process efficiencies, increased automation of claims handling and through investments in its IT infrastructure.”

The statement added that since 2010, the FSCS has been making “significant investments” to improve its processes and its ability to quickly scale up its claims processing operations. It anticipates that the costs of the strategic change programme will decrease by 19 per cent between 2015/16 and 2016/17.

The levy is broken down into £67.4m for the proposed management expenses budget - down 2.5 per cent on 2015/2016 - and a proposed contingency reserve for 2016/17.

Only three responses to the consultation were received - two from representative bodies and one from an authorised firm. All of these welcomed the year-on-year reduction in the levy.

One respondent requested a statement from the FSCS on what it thinks good value for money looks like in the context of its strategic projects.

But the FCA said the FSCS does not intend to issue a further statement on its targets in relation to value for money, beyond the information it has already provided in its 2016/17 plan and budget.