Find out more about the FSCS’s supplementary levy and why the retail pool is triggered.
FSCS explained in their January 2018 edition of Outlook that they intended to raise a supplementary levy for the life and pensions intermediation class. The annual levy limit of £100m has already been raised for this class. A further amount of £24m is being levied to meet the total compensation costs for this class and will be funded by the retail pool.
FSCS has also decided to repay general insurers £20m of the forecasted surplus for 2017/18.
The FSCS letter to levy payers also explains the reason for the supplementary levy.
Read about class funding limits in our Handbook (FEES 6 annex 2).
The FCA retail pool
The FSCS uses a cross-subsidy approach to fund the claims for a class that has exceeded its annual funding limit. The cross-subsidy is funded by the classes belonging to the FCA retail pool.
The classes that participate in the retail pool and their funding limits are set out in FEES 6 annex 5.
The amount of funding provided by the retail pool is allocated to each class in proportion to the size of their retail pool levy limit. This is set out in FEES 6.5.A.1. See table 1 for the amounts allocated to classes for this year.
The FSA Policy Statement PS13/04 confirmed the final rules in relation to the retail pool, including the contribution from providers.
Calculation of the FCA retail pool
The retail pool levy for the FCA funding classes is based on a firm’s annual eligible income reported for the 2017/18 levy year. This is the same data that was used to calculate the FSCS compensation cost levy as shown on a firm’s annual fee and levies invoice.
Firms in the investment intermediation class (SD02) will not be levied for their share of the retail pool levy. The FSCS will use surplus funds held for this class to offset against their contribution.
The levy for firms in the FCA provider classes (F, G, H and I) is calculated on the same basis as the FSCS base cost levy.
PRA FSCS classes (A deposit, B1 general insurance provision and C1 life insurance provision) do not contribute to the retail pool.
Table 1: Distribution of the £24m supplementary levy to the retail pool
|
FSCS class |
FSCS class description |
Tariff base |
Class share of the Retail Pool |
Estimated levy |
|---|---|---|---|---|
|
B2 (SB02) |
General insurance intermediation |
annual eligible income (AEI) |
£7.58m |
£0.87 per £1,000 of AEI |
|
D2 (SD02) |
Investment intermediation |
annual eligible income (AEI) |
£3.79m |
not applicable (offset by surplus) |
|
E2 (SE02) |
Home finance intermediation |
annual eligible income (AEI) |
£1.01m |
£0.72 per £1,000 of AEI |
|
D1 (SD01) |
Investment provision |
annual eligible income (AEI) |
£5.05m |
£1.00 per £1,000 of AEI |
|
F (SRF1) |
Deposit acceptor's contribution |
FCA A001 fee |
£2.78m |
£39.63 per £1,000 of FCA fee |
|
G (SRG1) |
Insurers life contribution |
FCA A004 fee |
£1.77m |
£42.53 per £1,000 of FCA fee |
|
H (SRH1) |
Insurers general contribution |
FCA A003 fee |
£0.88m |
£35.45 per £1,000 of FCA fee |
|
I (SRI1) |
Home finance providers & administrators contribution |
FCA A002 fee |
£1.14m |
£69.18 per £1,000 of FCA fee |
Surplus of funds for General Insurance Provision class (SB01): £20m
The timings and level of claims have been lower than forecast for the General Insurance Provision class. FSCS are expecting a surplus of £28m in this class and have decided to repay £20m of this to firms for the 2017/18 levy year.
Firms in this class will be levied for their share of the retail pool and will receive a credit for their share of the £20m.
Cheque refunds for the net amount will automatically be issued to firms within 30 days of the credit note date.
Table 2: Calculation of the repayment
|
Tariff base |
Surplus repayment |
Estimated amount |
|---|---|---|
|
relevant net premium income (RNPI) |
£15m |
£0.35 per £1,000 of RNPI |
|
eligible gross technical liabilities (EGTL) |
£5m |
£0.07 per £1,000 of EGTL |
Online fees calculator
The supplementary levies are not included in the online fees calculator.
Cancelling firms: Firms that were authorised as at 1 April 2017 and applied to cancel their part IV permission part way through the current fee year and are still authorised are liable for their share of the levy.