Our November 2024 Outlook statement

Progress in 2024

When we set our management expenses budget back in January and our last compensation forecast in May, we signposted a major change to our operating model. We took the strategic decision to bring the majority of our claims management in-house, giving us more control over customer experience, productivity, knowledge management and flexibility to handle the variety of claims we receive each day.

In June, we announced that we had appointed PwC as our new claims partner and the team at PwC are now starting to handle claims for us as part of a managed transition to our new operating model. I’m pleased to report that this transformation programme is progressing well and is on schedule to be fully embedded in the 2025/26 financial year.

FSCS is tasked with assessing claims and paying compensation as efficiently as possible. During the first half of this financial year, we’ve increased claims decisions by 18% year-on-year and maintained our high customer satisfaction and quality scores. Crucially, this means that we are getting more customers back on track, which is at the heart of everything we do. This is testament to the talent and hard work of the teams across FSCS and our claims partners.

Over two-thirds of our advice claims are now considered highly complex, doubling from one third a few years ago. Claims increasingly require more specialist resource, deeper investigation and more time to complete, with data-gathering challenges a key driver of claim timescales. We’re continually working hard to identify areas where we can optimise the time taken to complete a claim without significantly increasing costs.

You can hear more about what we’re doing in this area in the video that accompanies this edition of Outlook.

Our latest forecast for 2024/25

The 2024/25 levy remains as forecast in May 2024 at £265m.

We now expect to pay slightly more compensation during 2024/25 than anticipated in May - £372m, up from £363m. This is mainly due to the progress on claims decision volumes mentioned above.

Alongside paying out compensation to customers, maximising recoveries from failed firms is a critical part of what we do. We use the money we recover to offset the levy and, where possible, return extra compensation to customers who lost more than our compensation limits.

We’ve continued to secure substantial recoveries and we now expect to recover almost double against our forecast in May. This is part of the reason we are able to keep the 2024/25 levy as previously forecast, even with the compensation figure having increased slightly.

An initial look at 2025/26

Our first total levy forecast for 2025/26 is £394m. This is currently based on compensation costs totalling approximately £367m in the 2025/26 financial year, which is broadly flat compared to 2024/25.

While compensation remains flat, surplus balances have been reduced by £171m in total, which is why the overall levy forecast has increased. The class balances are lower because historical surpluses have now been fully used to offset the annual levy in prior years.  

For 2024/25 we saw a reduction between the November 2023 initial forecast and May’s updated forecast. We do not expect to see a similar reduction again as we do not have these surplus balances to offset the levy in 2025/26.

Early in the new year we’ll publish our Budget Update. This will provide full details of our expected management expenses for 2025/26, which form part of the overall levy and are jointly consulted on by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA). In May, we’ll update our forecast and confirm the final levy.

You can find full details of our forecasts broken down by funding class at www.fscs.org.uk/outlook.

Martyn Beauchamp

Interim Chief Executive