PRA is consulting on the FSCS MELL for 2024/25. Under FSMA, PRA and FCA must set a limit for the total management expenses that the FSCS can levy on financial services firms. The MELL is the maximum amount that the FSCS may levy in a year for its operating costs without further consultation.
The MELL comprises the management expenses budget, which is the forecast cost of running the compensation scheme over the year, and an unlevied reserve, which allows the FSCS to raise additional funds at a short notice to meet costs that were not foreseen. Tthis does not include claimants’ compensation costs as these depend on the number of claims received and are determined separately by the FSCS.
The proposed management expenses budget for 2024/25 is £103.1 million, 3.3% higher than the 2023/24 budget of £99.8 million. The increase is due to the investment required to implement an FSCS decision to transition to a new operating model to tackle trend of more complex claims being received by FSCS over recent years.
The proposed unlevied reserve for 2024/25 is £5 million, which is £5 million less than the 2023/24 reserve of £10 million. The 2024/25 figure is a return to the pre-pandemic level.
The consultation closes on 12 February 2024.