Financial Conduct Authority and Prudential Regulation Authority consult on setting the FSCS management expenses levy limit at £108.6m for 2025/26

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have opened a consultation on the proposed Management Expenses Levy Limit (MELL) for the Financial Services Compensation Scheme (FSCS) for 2025/26. The proposal would cap the FSCS’s operating-cost levies on FCA- and PRA-authorised firms at £108.6m, to apply from 1 April 2025 to 31 March 2026. The proposed MELL comprises a £103.6m management expenses budget and a £5m unlevied (contingency) reserve. The limit is £0.5m higher than the 2024/25 MELL of £108.1m, with the consultation noting that the FSCS is absorbing some inflationary costs, making the increase lower in real terms. Key budget movements include a 5% (£2.5m) rise in staff costs and a 7% (£0.5m) rise in IT, partly offset by reductions in professional and legal fees (down 8% or £0.8m) and outsourced claims handling (down 13% or £1.8m); the staff cost budget includes £0.5m to reflect the planned increase in employers’ National Insurance contributions from 1 April 2025. The unlevied reserve would remain at £5m and can be raised without further consultation if needed for unforeseen operating costs, with the FSCS expected to notify the FCA and PRA before accessing it. The consultation closes on 7 February 2025, with the FCA receiving responses on behalf of both regulators. Final rules are intended to be implemented via an FCA Handbook Notice and a PRA Policy Statement in time for the FSCS financial year starting on 1 April 2025.