In an update, the FSCS said this was a small decrease on the prior period and attributed this to several factors, mainly centring on the investment provision class.
Martyn Beauchamp, chief executive of the FSCS, said: “These early expectations for 2026/27 reflect the changing claims environment. We currently forecast lower compensation costs in the Investment Provision class, mainly driven by fewer claims against SIPP operators. A higher opening balance in this class is also anticipated as we carry forward surpluses from 2025/26.
“Additionally, we expect some funding classes to begin the period with lower opening balances, as surpluses carried over from previous years have been effectively utilised. This brings the levy forecast for these classes in closer alignment with projected compensation costs.”
Looking at the levy for the 2025/26 period, it remains as forecast in May at £356m, and it didn’t expect any additional levies on firms.
The FSCS added that compensation costs were expected to stay at £215m, 5% down on its May forecast.
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This was attributed to a “change in the types” of claims the FSCS expects to pay completions for.
The report said: “While the total volume of claims decisions remains the same as anticipated in May, there are now more lower-value general investment and self-invested personal pension (SIPP) advice claims expected within the LDII class.
“Conversely, fewer higher value SIPP operator claims are now expected within the Investment Provision class.”
It also forecasts that for this period, it will make £40m in recoveries from estates of failed firms, a rise of £5m on the May forecast.
The FSCS added that it had completed the transition in its claims service, so most claims management and customer call-handling was now in-house.
It said this would enhance the customer experience, boost productivity and build internal expertise.
The FSCS said it had halved the time spent chasing third parties for critical data needed to calculate losses for customers.
Home Finance Intermediation costs rise to £1.4m
Looking at Home Finance Intermediation specifically, the FSCS said compensation costs came to £1.4m, which is around £1.1m higher than its forecast in May.
The FSCA attributed the increase to “processing more claims than originally forecast”, linked to Principal Mortgage Services.
Consequently, the Home Finance Intermediation class is expected to end the year £1m in deficit.
The FSCS said firms would not be levied for this in 2025/26, but this would be covered in levies for 2026/27.
The levy for the Home Finance Intermediation segment is currently forecast at £1.5m, which is due to a £1.7m lower opening balance compared to 2025/26.
The FSCS added that this segment would receive £500,000 in provider contributions from home finance providers, which compares to no providers in the 2025/26 period.
