In its latest update, the organisation said this included a £3.9m increase in investment to “deliver essential strategic initiatives and ongoing enhancement of FSCS processes and customers services”.
There is also a £3.2m rise in controllable costs due to rising prices, such as rent and costs associated with core business functions like IT and HR.
The FSCS added that there was a £2.8m reduction in volume-related costs, which is costs associated with investigating and assessing claims. It said this was due to expectation that fewer claims would be processed than in the 2022/23 budget.
The total levy for the year, which includes management expenses and estimated compensation payments, remains as forecast at £478m.
The organisation forecast management expenses at £89.2m, which is a £6.3m reduction against last year’s budget.
The Financial Conduct Authority and Prudential Regulation Authority will consult on an overall management expenses levy limit of £109.8m. This covers the FSCS’ management expenses budget of £99.8m and an unlevied reserve of £10m.
It said this would ensure it has the funds to process a significant increase in claims for any “unexpected large firm failures”. This is £5m less than last year.
Caroline Rainbird, FSCS’ chief executive, said claims-handling infrastructure and support made up the largest segment of its proposed management expenses for 2023/24 at 76 per cent of to the total budget.
“This allows FSCS to carry out its core function, ensuring we are helping customers get back on track as quickly as possible,” she added.
Rainbird continued that this year’s budget was five per cent up on last year, which related to “a rise in our controllable costs, inflation and resulting price rises”.
“We have however worked hard to keep costs below inflation through careful control of our spending,” she said.
Rainbird said the budget included an increase in its investment costs, which covers essential enhancements to our technology and processes.
“Although today we have the right teams and systems in place to process claims and make recoveries, the sheer complexity of claims now coming to FSCS means that we are likely to see costs increase over the coming years.
“This means it is critical that we start investing more in our claims handling capabilities now to ensure we can continue providing an efficient service for years to come – one that is both accessible and swift for consumers who are left out of pocket when a firm fails, and cost-effective for the industry that funds us,” she noted.
