The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have proposed a management expenses levy limit of £74.4m. This is a reduction of 7.4% from last year’s figure, which totalled nearly £80m.
The levy covers all non-compensation costs from April 2015 to March 2016.
The FSCS’s general running expenses, including staff and building costs, IT, legal services, outsourcing and claims, make up £69.1m of the total planned levy. This amount also includes the cost of outsourcing which the regulator said gives the FSCS “flexibility to handle fluctuating numbers of claims”.
A “contingency reserve” of £5.3m is also included in the proposal, which allows the scheme to respond to unforeseen costs.
This reserve was reduced from £20m in the 2013-14 financial year, but has remained unchanged since last year’s budget.
Released by the two regulators today, the consultation paper said setting the management expenses at £74.4m would allow the FSCS to continue providing a compensation scheme that is “efficient, fair, approachable and responsive”, while also improving consumer confidence and protection.
It also added that the main consumer protection benefit would be the reduction in financial loss to consumers in the event of a firm failure.
Chris Hannant, director general at the Association of Professional Financial Advisers (APFA), said: “Any fall in the costs borne by advisers is to be welcomed.
“It is important that the regulatory bodies maintain a strong discipline on costs. Ensuring that the costs advisers pay to support initiatives like FSCS are fair and proportionate is a central part of APFA’s efforts to ensure a better deal for the industry.”
The FSCS paid out an estimated £300m in compensation in the year 2014-15.
It has recovered £100m so far in compensation from firms that sold Keydata products to clients after the life settlement firm collapsed in June 2009.
Comments on the consultation paper must be made before 16 February this year.
