The consultation paper, released by the FCA and the PRA, shows that the proposed budget for this year is £78.2m, up £3.6 million on the 2019/20 budget. The fees cover the FSCS’s ongoing operating costs such as IT, staff, outsourcing, legal and claims handling costs.
The document says that 75% of the increase can be attributed to a forecast rise in the volume and complexity of claims expected by the FSCS.
The FSCS has budgeted £5.1m to process particularly complex claims over 2020/21 but says it may also need to use £2.6m of its £5m contingency reserve due to an unexpected increase in the number of claims it will need to handle this year.
Claims handling infrastructure and support constitutes the largest part of the management expenses budget, amounting to £57.9 million, up £4m or 7% from last year.
The FSCS’s budget for outsourced claims handling will rise 29% to £17.3m, an increase of £3.9m on the 2019/20 budget, to account for a projected increase in the volume of complex claims the FSCS may need to handle.
Internal claims handling support costs amount to £10.6 million, an increase of £0.9 million.
The FSCS says the increasing complexity of cases is driving rising costs due to the need for more IT and legal support.
