FSCS Management Expenses Levy Limit 2026/27 - £113m Cap Confirmed
PS26/4 confirms the Financial Services Compensation Scheme's Management Expenses Levy Limit (MELL) for 2026/27 at £113 million, an increase of £4.4 million from the previous year. This is a joint FCA-PRA policy statement and applies from 1 April 2026. All FCA and PRA-regulated firms that contribute to FSCS levies are affected by this decision.
Context:
The FSCS MELL is the cap on the compensation scheme's management and operating costs that can be recovered from the levy-paying population of regulated firms. It covers running costs of the FSCS, staff, legal, technology, and overhead, rather than the direct compensation paid to consumers. The annual MELL consultation is a routine element of the FCA and PRA's fees and levies cycle.
The proposed MELL of £113 million (a £4.4 million increase on 2025/26) reflects the increasing operational demands on the FSCS, driven partly by higher case volumes, particularly from motor finance DCAs and ongoing legacy claims from investment fraud and pension transfer failures. The FSCS is also investing in systems and people to handle the anticipated volume from the motor finance redress scheme.
The levy is split across the FSCS funding classes, which allocate costs to different segments of the regulated population based on the types of activities firms are authorised to carry out. The increase impacts all levy-paying firms but falls most heavily on those in classes with historically elevated claims, including life distribution and investment intermediation.
Rules and Guidelines:
The MELL is set at £113 million for the financial year 1 April 2026 – 31 March 2027
The levy applies from 1 April 2026 and is recoverable from levy-paying firms across the FSCS funding classes
The FCA has made consequential amendments to FEES 5 (Financial Ombudsman Service) and FEES 6 (FSCS) in the Handbook Notice
Dual-regulated firms are subject to both FCA and PRA FSCS levy obligations; the joint FCA-PRA consultation ensures coordination across both regulators
Firms invoiced £50,000 or more in combined FCA/PRA fees are subject to the joint invoice due date amendment agreed as part of the CP25/33 fees consultation
Businesses Affected:
All FCA-regulated firms that are FSCS levy payers, across investment, lending, deposit-taking, insurance, and home finance funding classes
PRA-regulated firms (banks, insurers) are subject to both FCA and PRA FSCS obligations
Motor finance lenders: the FSCS is preparing for elevated claims volumes from the redress scheme, which will influence future MELL levels
Finance, regulatory affairs, and tax teams are responsible for budgeting and provisioning for annual FSCS levies
Next Steps:
Review your firm's FSCS funding class allocations and estimate your 2026/27 MELL contribution based on the confirmed £113m cap
Update budget provisions to reflect the £4.4m year-on-year increase and any changes to your firm's authorised activity profile
For motor finance lenders: model the potential MELL impact of elevated future FSCS case volumes arising from the DCA redress scheme
Dual-regulated firms: review both the FCA and PRA FSCS levy obligations and ensure the joint invoice due date amendment is reflected in your payments calendar
Financial Conduct Authority, Financial Services Compensation
