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FSCS Levy to Rise

The Financial Services Compensation Scheme’s (“FSCS“) levy for management expenses will increase by nearly 5% to £78.2 million, for the period 2020/21. The FSCS will also receive an unlevied contingency reserve of £5 million.

A recent consultation conducted by the FCA and the Bank of England found that 75% of the increase is due to an expected rise in the volume and complexity of claims that the FSCS will process (many related to SIPP operators). The consultation stated that, “Setting the management expenses levy limit at £83.2m [including the £5 million contingency] ensures the FSCS can continue to operate and to meet its objective of providing a compensation scheme that is efficient, fair, approachable and responsive.

Claims handling infrastructure and support costs alone account for £57.9m of the management expenses budget. In particular, the consultation illustrated that the FSCS’s budget for outsourced claims handling has grown 29% to £3.9 million from 2019/20 to 2020/21.

The FSCS’s integral support costs such as IT, facilities and central services will total £30 million. Staff costs will amount to nearly £23 million, and the FSCS’s borrowing facility, used for compensation payments in the event of firm failure, will cost around £7.2 million to maintain.

With regard to staffing, the FSCS is planning on hiring 18 new staff members, primarily in its IT and legal teams during 2020/21. The increased headcount will also assist the FSCS in managing its increased and more complex caseload.

Although these are significant operating costs, the FSCS says they are justified and necessary to ensure eligible consumers are compensated appropriately in the event of firm failure. Indeed, the consultation observed that, “While the wider benefits of the FSCS are hard to quantify, the direct benefit to consumers from FSCS compensation is forecast to be £548 million in 2019/20.

© Copyright 2020 Squire Patton Boggs (US) LLP


About this Author

Garon Anthony, Squire Patton Boggs, litigation attorney

Garon Anthony is a partner in the Litigation Practice Group. He has specialised in dispute resolution work since he qualified as a solicitor and has considerable experience in general corporate and commercial litigation work, acting for both private and public sector clients.

Garon regularly resolves disputes for clients in the financial services/insurance sector. That encompasses professional negligence, fraud issues/recovery processes, dealing with claims and complaints by customers of the mis-selling of retail products, handling insurance policy coverage disputes for corporate...

44 121 222 3507
Mariyam Harunah Debt Recovery Attorney Squire Patton Boggs

Mariyam regularly acts for a diverse client base, including, SMEs, FTSE 100 and 250 corporations, public bodies, developers, insurers and individuals.

Mariyam has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, misrepresentation, defamation, professional negligence, debt recovery and insurance.


  • Assisting on an approximately £160 million multi-action and multi-defendant claim following the sale of a company to investor clients.

  • Acting on a variety of disputes for clients seeking the recovery of unpaid monies owed pursuant to contract.

  • Acting on a portfolio of financial mis-selling claims for a leading international bank.

  • Advising a variety of clients upon termination of contract issues.

  • Acting for industrial manufacturers and suppliers in the defence of contractual and tortious disputes with technical complexities, arising out of the provision of allegedly defective products.

  • Assisting in the provision of bespoke and strategic advice to a national regulator dealing with persistent defamation and harassment.

  • Acting for a leading hire purchase provider in enforcement proceedings.

  • Assisting on a £500,000 negligence claim by a leading supermarket arising out of property damage and business interruption at one of its warehouses.

44 121 222 3175