FSCS expects to pay £38m less in compensation in 2025/26

The Financial Services Compensation Scheme (FSCS) has today lowered its annual levy expectation for 2025/26 to £356m – £36m lower than its forecast in November.

The FSCS attributes this decline to the successful recovery of more than £56m from the estates of failed firms and relevant third parties and decreased compensation relating to the life distribution & investment intermediation (LDII) class with fewer claims now expected.

Brian Nimmo, head of redress at financial services consultancy Broadstone, commented: “The lowered predictions for compensation payments in 2025/26 reflect broader trends within the wider redress landscape as pay-outs for consumers reduce in size.

“A movement towards more claims requiring specialist investigation is also emerging with over two-thirds of claims now considered ‘complex’ up from one-third just a few years ago. It highlights the complex financial landscape that both firms and consumer must navigate nowadays alongside the specialist advice that firms require to ensure they are treating consumers fairly.”

Simon Harrington, head of public affairs at PIMFA, said: “We welcome the latest FSCS Outlook and the reduction in the 2025/26 levy forecast, supported by a notable £56m in recoveries, which is an encouraging sign of more effective action against poor conduct. 

"These recoveries not only ease the financial burden on firms that operate responsibly but also enhance consumer confidence in the framework itself. As we continue to engage with the FSCS, we remain committed to further reforms that move us closer to a genuine “polluter pays” model that offsets the costs of failure through fines and penalties on bad actors and not those who consistently act in the best interests of their clients.”