Levy information and retail pool

Levy class limits

Following consultation, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) set a limit on the amount that can be levied on each funding class in a year, by reference to what each class can be expected to afford in a year.

The class limits are set out in the FCA Handbook and the PRA Rulebook, in both cases at FEES 6 Annex 2.

The current levy limits are:

PRA classes

Deposits: £1,500m.
General Insurance Provision: £600m.
Life & Pensions Provision: £690m.

FCA classes

Debt Management: £20m.
Funeral Plans £5m.
General Insurance Distribution: £410m (including provider contributions of £100m)*.
Home Finance Intermediation: £55m (including provider contributions of £15m)*.
Investment Provision: £200m.
Life Distribution & Investment Intermediation (LDII): £330m (including provider contribution of £90m)*.

* Provider contributions: Since 1 April 2019, product providers are required to contribute approximately 25% of the levies falling to the related FCA intermediation classes (General Insurance Distribution, LDII and Home Finance Intermediation).

Read our article about how we forecast the levy.

When does FSCS raise a retail pool levy?

If the funding requirements of levies of an FCA funding class exceed the levy limit for that class, the excess costs are covered by the other FCA classes as part of the retail pool. This is a separate pot that all FCA classes are required to contribute to, where they have not reached their levy limit. It is only used when one class exceeds its annual levy limit.

All FCA funding classes can benefit from and contribute to the retail pool (with the exception of Deposit Acceptors, which only contributes to the retail pool).

Read our article for more information about the retail pool.

When does FSCS raise a supplementary levy?

The decision to raise a supplementary levy has to be made taking into account the particular circumstances that are relevant at the time. While it is not, therefore, possible to state categorically the circumstances that would give rise to a supplementary levy, we feel it is important to reiterate the following guidance:

FSCS will only raise a supplementary levy where it has reasonable grounds for believing that the funds available to it to meet relevant compensation costs or management expenses for the period until the next levy is due are, or will be, insufficient. We cannot levy in advance where there is not a reasonable expectation that we would have to deal with claims in a particular sector.

Borrowing between classes or using our commercial facilities is generally only utilised as a way of managing short term cash flow, or where the amount of the funding shortfall is considered to be too small to warrant an interim levy.
We would not normally expect to raise a supplementary levy on any class for an amount of less than £10m, and would give careful thought to amounts upwards to say £20m, especially if the compensation became due close to the end of the financial year.
FSCS does not take levy decisions either to trigger, or otherwise affect, contributions between classes. The key purpose of the levy is to safeguard sufficient funding for known or reasonably expected costs, applied as within the rules.