Outlook May 2023

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2023/24 levy update

The annual levy for 2023/24 is now £270m, this is lower than the indicative levy announced in Outlook in November 2022, and a decrease from the final 2022/23 levy which was £625m. Although the levy has decreased, we still expect compensation costs in 2023/24 to be high at £471m.

We do not expect a retail pool levy in 2023/24 as no class is expected to breach its annual levy limit.

The updated levy is £208m lower than the indicative levy published in the November Outlook. This movement is mainly driven by:

1) £97m of lower compensation costs in 2022/23 which have created additional surpluses. The three classes with the largest surplus increases are:

• the Life Distribution & Investment Intermediation (LDII) class as lower volumes of pension decisions were made as we trained additional pension claims handlers. Also, there were fewer upheld claims as more assessments determined that there was no financial loss; and
• the Investment Provision class as claims expected in 2022/23 are now expected in 2023/24 and later years; and
• the General Insurance Provision class as large insurance pay-outs were delayed due to the complex nature of these claims, or settled at lower amounts.

2) A decrease of £121m in compensation forecasted for 2023/24. The two classes with the largest decreases are:

• the General Insurance Provision class with a £56m reduction, partly relating to delays on large loss claims for failed estates; and
• the Investment Provision class with a £67m reduction, mainly due to fewer SIPP operator claims now expected for potential new failures, and with some claims moving into 2024/25 and beyond.

Surpluses and refunds

• In most classes with surpluses, we are expecting these funds to be utilised in the 2023/24 financial year. The 2022/23 surpluses have been carried forward and used to offset the 2023/24 levy.
• In classes where the surpluses are not expected to be fully utilised in 2023/24, there will be a £4m refund to the Home Finance Intermediation class; a £1m refund to the Home Finance Providers class and a £0.5m refund to the Debt Management class.

We continually review our underlying assumptions as these are affected by when firms fail and the timing and complexity of claims.

This May 2023 Outlook provides our latest update and the levy payable by the industry for the 2023/24 financial year. We will publish the next version later in the year.

Payment on account

All PRA and FCA regulated firms will be sent an annual levy invoice in summer 2023.

We have already invoiced firms £242m for payment on account for the 2023/24 levy. For those that made an advanced payment in March 2023, this will be deducted from their annual levy invoice in the summer. Credits to firms, if applicable, will be handled at the same time.

Levy breakdown - PRA classes

Levy breakdown - FCA classes

Read these articles for more information