Find out more about the FSCS’s supplementary levy and why the retail pool is triggered.
On 31 January 2019, the FSCS announced[1] that it would be raising supplementary levies for this levy year.
FSCS explained in their November 2018 edition of Outlook[2] that it was extremely likely that it would have to raise a supplementary levy for the life and pensions intermediation class. The levy limit for 2018/19 has already been reached for this class. A further amount of £78m is required for this class and will therefore be funded by the retail pool.
FSCS is also raising a supplementary levy for the deposit class and general insurance class.
The FSCS letter to levy payers explains the reason for the supplementary levy.
Read about class funding limits in our Handbook (FEES 6 annex 2[4]).
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[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[6]. See table 1 for the amounts allocated to classes for this year.
The FSA Policy Statement PS13/04[7] 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 2018/19 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 provision and intermediation classes (SD01 and SD02), and home finance intermediation class (SE02), will not be levied for their share of the retail pool levy. The FSCS will use surplus funds held for these classes to offset against their contribution.
The levy for firms in the FCA provider classes F, G and H is calculated using the same data for the equivalent PRA classes. The levy for firms in class I is calculated using the same data for FCA fee-block A2.
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 £78.13m 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) |
£15.38m |
£1.63 per £1,000 of AEI |
|
D2 (SD02) |
Investment intermediation |
annual eligible income (AEI) |
£12.08m |
not applicable (offset by surplus) |
|
E2 (SE02) |
Home finance intermediation |
annual eligible income (AEI) |
£3.22m |
not applicable (offset by surplus) |
|
D1 (SD01) |
Investment provision |
annual eligible income (AEI) |
£16.11m |
not applicable (offset by surplus) |
| K (SD01) | Debt management | Debts under management (DUM)/value of lending (VOL) |
£1.61m |
£6.27 per £1m of DUM/VOL |
|
F (SRF1) |
Deposit acceptor's contribution |
Protected deposits (PD) |
£8.86m |
£7.57 per £1m of PD |
|
G (SRG1) |
Insurers life contribution |
Relevant Net Premium Income (RNPI) and Eligible Liabilities (EL) |
£5.64m |
£43.95 per £1m of RNPI and £1.21 per £1m of EL |
|
H (SRH1) |
Insurers general contribution |
Relevant Net Premium Income (RNPI) and Eligible Liabilities (EL) |
£2.82m |
£44.71 per £1m of RNPI and £9.58 per £1m of EL |
|
I (SRI1) |
Home finance providers & administrators contribution |
Number of home finance transactions (NOHFT) |
£3.63m |
£0.52 per NOHFT |
Table 2: Deposit class and general insurance class supplementary levies
|
FSCS class |
FSCS class description |
Tariff base |
Esimated levy |
|---|---|---|---|
|
SA01 |
Deposit |
Protected Deposits (PD) |
£13.14 per £1m of PD |
|
SB01 |
General insurance |
Relevant Net Premium Income (RNPI) |
£229.54 per £1m of RNPI |
| Eligible Liabilities (EL) | £49.07 per £1m of EL |
Deposit class (SA01) levy is adjusted using the firm’s aggregate risk weight (ARW).
Online fees calculator
The supplementary levies are not included in the online fees calculator[8].
Cancelling firms: Firms that were authorised as at 1 April 2018 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.