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Minimising your FSCS Levy (2)


Mar 12 2012

Minimising Your FSCS Levy

Relevance:              All Firms with commercial clients

Action required:     Consider again any relevant action needed to minimise FSA Fees and Levies.

Here we are again with our yearly reminder and plea!

The FSA has recently issued its annual consultation on levels of fees and levies for 2012/13. 

The FSA’s own periodic fee has increased from last year even though the share paid by insurance intermediaries is slightly reduced but the associated levies to FOS and FSCS are likely to be noticeably lower.

FOS funding does not require the special levy made last year and they have frozen the compulsory levy and individual case fee, although they are introducing a supplementary case fee relating to PPI cases.

FSCS funding from general insurance intermediation is going down, from £69.5m to £57m, which now represents only slightly more than 25% of the total initial levy.

So, we do not apologise for pointing out again that there may be benefits in identifying “tailored” income, especially for FSCS purposes.

The FSCS levy is based on your annual eligible income, which is your annual income (commission and fees) from clients that are eligible to claim compensation from the FSCS.  Eligible claimant income is made up of commissions and fees earned in respect of:

  • individuals;
  • businesses with a turnover of under £1m; and
  • compulsory insurance classes for your clients with a turnover exceeding £1m (third party motor and employers’ liability).

As before, we show below the potential savings in the following two examples (based on either 75% or 50% of revenue being derived from eligible claimants):

 

Example total annual income:

A) £320,000; B) £800,000

 

 

Example savings based on % of income from eligible claimant income:

1) All; 2) 75%; 3) 50%

 

A

1

2

3

 

B

1

2

3

FSCS levy – 2012/13

2,165.43

1,642.35

1,119.27

 

FSCS levy – 2012/13

5,359.96

4,052.25

2,744.53

  • For the example firm with a turnover of £320,000, the savings range is roughly £500 to £1,000.
  • For the example firm with a turnover of £800,000 the saving range is around £1,300 to £2,600.

As previously indicated, if your systems allow you to make this calculation you are probably already benefitting.  However, if your systems do not give these figures up easily, you have to decide if the savings can justify the time and effort required to undertake such an exercise.

Invoices for FSA Fees and Levies will be prepared and issued from June and you are given 30 days to make the payment.  If you are registered for Online Invoicing, keep an eye out for the email notification.

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