Interim Chief Executive's Statement - Budget Update
As we approach the end of the current financial year, I’m pleased to introduce our latest FSCS Budget Update. This publication focuses on our management expenses, and our plans for April 2025 to March 2026.
As a reminder, you can find our full 2025/26 levy forecast, including the compensation we expect to pay over the year, in last November’s Outlook. We’ll provide our next full levy update in the spring.
Latest 2024/25 forecast
For 2024/25 we remain on track to be within the management expenses budget of £103.1m. We have made some budget savings, with lower claims-processing costs than previously anticipated. You can see more details about compensation costs for the year in our Outlook publication.
Our proposed 2025/26 budget
For 2025/26 we are proposing a management expenses budget of £103.6m, which is an increase of 0.5% on the 2024/25 budget.
The majority of our budget covers claims-handling costs. It also funds other essential activities, including pursuing recoveries, investments to improve the efficiency of the organisation and promoting consumer awareness of FSCS protection and our claims service which is free to customers at the point of use.
The overall proposed Management Expenses Levy Limit (MELL) is £108.6m, which includes a £5m unlevied reserve on top of the core budget. This reserve is the same as the 2024/25 financial year.
Balancing delivery and cost
We have continued to ensure we absorb as many inflationary rises as possible, keeping our expected management expenses in line with the current financial year.
We have invested in staff to enhance our team of experts and strengthen our internal capabilities. We are funding this investment in expertise with savings from reductions in outsourced claims-handling costs and professional fees.
The increasing complexity of the claims that now make up the majority of FSCS’s work could lead to increased cost and means claims often require more specialist resource and deeper investigation. For example, the amount of data that we receive on average per claim has increased by 89% in the last two years.
We’re continually working hard to identify areas where we can optimise the time taken to complete a claim without significantly increasing costs.
Despite these challenges, during the first half of 2024/25, we increased claims decisions by 18% year-on-year and maintained our high customer satisfaction and quality scores.
Next year we come to the end of our three-year plan to build our in-house claims-handling capability. This major change to our operating model has given us greater control and flexibility to handle the variety of claims we receive each day.
This transition is progressing well, continuity of service has been maintained, and we are on schedule to be fully embedded in the 2025/26 financial year.
In 2025/26 we will keep the level of investment the same as in this financial year. This will enable us to build on the existing positive changes, to lay the foundations for future advice claims transformation and deliver further enhancements to depositor protection.
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are jointly consulting on our 2025/26 budget as part of the MELL consultation, and you can find this consultation on their respective websites. The MELL consultation closes on Friday 7 February 2025.
Martyn Beauchamp
Interim Chief Executive