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A financial lifeboat scheme is expecting to pay out £367 million in compensation in 2025/26.
The Financial Services Compensation Scheme (FSCS), which published the update for its outlook, said the predicted total will be similar to 2024/25, when £372 million is expected to be paid out.
The FSCS is the UK’s compensation scheme that protects customers of authorised financial services firms if they fail or stop trading.
Cash surpluses have kept the levy below compensation levels in the last two financial years
Martyn Beauchamp, FSCS
The products it protects include deposits held in banks, building societies and credit unions, investments, pensions, insurance and funeral plans.
The FSCS is funded by the financial services industry. Firms pay an annual levy to fund the service.
The levy for the 2024/25 financial year remains as previously forecast in May at £265 million, and no additional levy is expected for the remainder of the current financial year, the body said.
However, the levy for 2025/26 is forecast to be higher than this year, at £394 million, with lower surpluses being taken forward, the FSCS said.
Surpluses arise when FSCS costs are lower than forecast, for example, when fewer firms than expected failed during the coronavirus pandemic, compensation costs were below forecast. They can also happen when more money than expected is recovered from firms.
Martyn Beauchamp, interim chief executive of the FSCS, said: “While the levy is projected to increase in 2025/26, as discussed in previous outlook forecasts, cash surpluses have kept the levy below compensation levels in the last two financial years, as we’ve had significant surplus balances at the start of each year in some classes. This is no longer the case for 2025/26.
“In the next financial year our new operating model will be fully embedded. Alongside this, we are always looking at ways to further improve our claims processes, working hard to find efficiencies without significantly increasing costs.”
