The Financial Services Compensation Scheme (FSCS) has revealed its spending plans for 2026/27, setting a £108 million management expenses budget that delivers genuine savings when inflation is taken into account. The allocation breaks down into £97 million for day-to-day operations – a 6% cut from last year – plus £11 million earmarked for expanding its revolving credit facility (RCF). When stripped of inflation, core running costs are down 11% in real terms. Meanwhile, the current year’s budget of £108.6 million stays unchanged, with the FSCS confirming it won’t charge firms for the £5 million contingency reserve it had set aside.
The additional RCF funding responds to recent regulatory shifts, including new bank resolution rules and higher deposit protection limits. Working alongside HM Treasury and the Bank of England, the FSCS plans to double its credit facility from £1.45 billion to £3 billion, ensuring it can pay out compensation rapidly if firms collapse whilst protecting public money during major defaults. Efficiency improvements across the organisation are expected to absorb most of the extra RCF costs, keeping the overall budget in step with inflation. The Prudential Regulation Authority and Financial Conduct Authority are consulting on a £113 million levy limit for 2026/27 – a £4.4 million inflation-only rise that includes the same £5 million contingency buffer. The consultation closes on 10th February 2026.
FSCS News – Was there ever a better time to submit a financial services compensation claim than now?
After all, their recent update in the financial press seems to say costs are down and productivity is up.
When the Financial Services Compensation Scheme (FSCS) revealed its spending plans for 2026 to 2027, a £108 million management expenses budget that supposedly delivers real savings once inflation is factored in. I’ll be honest, I was surprised.
At first, I thought, does this mean fewer claims?
But no. I hadn’t read it properly. This was about costs, not compensation. It’s about how much the FSCS, funded by regulated financial firms because the FSCS covers their losses if they go under, is allocating to deal with claims.
So what was the report actually about?
Around £97 million is for day-to-day operations, a 6 percent cut from last year. Another £11 million is earmarked for expanding its revolving credit facility. Strip out inflation and core running costs are down 11 percent in real terms, which on paper looks positive.
The increased RCF funding relates to regulatory changes including new bank resolution rules and higher deposit protection limits. Working with HM Treasury and the Bank of England, the FSCS plans to double its credit facility from £1.45 billion to £3 billion, making sure it can pay compensation quickly if firms collapse while keeping public money protected during major defaults.
The Prudential Regulation Authority and the Financial Conduct Authority are consulting on a £113 million levy limit for 2026 to 2027, a £4.4 million inflation only rise, with the same £5 million contingency buffer. The consultation closes on 10 February 2026.
Efficiency improvements are expected to absorb most of the extra RCF costs. But if the FSCS is tightening budgets, it raises some fair questions about whether cost saving is happening in the right places.
Why am I writing about this?
First, we are very lucky to have the FSCS. Very few countries have a lifeboat fund that steps in when firms fail.
However, and this comes from real front-line experience, the FSCS could increase spending in the right areas and actually save money.
When a pension or investment claim is submitted, the FSCS applies 8 percent simple interest per annum while they process it. So, if the claim is £50,000 and it takes them 18 months, that’s a further £6,000 added. A 12 percent increase, purely because of delays.
The FSCS handles straightforward claims very well, but complex pension and investment claims require huge amounts of detail, evidence and valuations within restrictive time frames. The FSCS simply cannot get through them quickly enough before something expires.
We’ve had clients who were scammed out of their pensions, with a regulated financial adviser involved, which were upheld, where the final claim was obviously above the £85,000 FSCS cap. But the FSCS “could not” pay out until every valuation was completed. By the time one valuation was obtained, another had expired.
The result would have been the same either way, £85,000 to the client.
But in one case, the client didn’t live long enough to receive it. It went to their beneficiaries.
So yes, cost saving is good, but service should come first
A simple, common-sense solution exists.
If a client is clearly going to receive the £85,000 maximum, the FSCS could easily get them to sign a waiver confirming they understand the cap. That alone would save the FSCS time and money and would save clients a great deal of unnecessary stress.
If you are facing any claim related issues, book a free call with our claim experts.
