Although compensation costs attributed to the home finance intermediation class are expected to remain similar to levels this year, the levy will be lower due to higher surpluses of £1.1m being brought forward. This is compared to a deficit of £2.2m that was brought forward from 2025/26.
Home finance providers will contribute £300,000 towards the levy in 2027/28, down from £1m in 2026/27.
The FSCS has forecast £500,000 in compensation related to mortgage and equity release advisers, slightly higher than the £400,000 estimate made in May’s outlook.
No levy will be required from distributors of general insurance for 2026/27.
The overall FSCS levy has remained at £247m, as previously forecast, while projected compensation costs have risen 9% to £292m.
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A £100m reduction in surplus from 2026/27 is expected to result in the FSCS levy for 2027/28 rising to £360m. Meanwhile, the organisation has forecast compensation costs of £266m for the period.
The FSCS now expects to recover £43m from failed firms and relevant third parties by the end of 2026/27, £10m more than forecast in May. Most recoveries will offset the levy, reducing the amount firms need to pay.
Martyn Beauchamp, chief executive of the FSCS, said: “Maximising recoveries, maintaining strong cost discipline and driving operational efficiencies remain key to delivering value for the industry. We now expect to recover £43m by the end of the financial year, 30% more than anticipated in May, helping to offset levy requirements as available surplus balances reduce.
“Alongside delivering value for industry, our protection plays an important role in building confidence in financial services.
“As we reach a full year of operating with the increased £120,000 deposit protection limit, our focus remains firmly on the future: being ready when customers need us, managing costs responsibly for industry, and providing the protection that underpins confidence in UK financial services.”
