CP26/2: Financial Services Compensation Scheme – Management Expenses Levy Limit 2026/27
Executive Summary
The FCA and PRA are consulting on setting the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) at £113 million for 2026/27, comprising a £108 million management expenses budget (up £4.4 million from 2025/26, broadly in line with inflation) and a £5 million unlevied reserve. This matters because it caps the operating costs (e.g., IT, staff, legal, claims handling) that FCA- and PRA-authorised firms must fund via levies, excluding separate compensation payments, ensuring FSCS efficiency while controlling firm burdens. #
What Changed
- Proposed MELL of £113 million for 2026/27: £108 million budget + £5 million unlevied reserve. - Budget increase of £4.4 million (4%) from 2025/26, aligned with inflation; excluding new revolving credit facility (RCF) enhancement costs, it reflects a £6.6 million nominal and £11 million real-terms reduction on a like-for-like basis. - Budget allocated across PRA and FCA fee blocks based on firms' regulated business volume, with smaller firms contributing less. - No changes to compensation levies, which remain separate and forecast at £342 million total levy including compensation. #
What You Need To Do
- Review CP26/2 (FCA) and CP1/26 (PRA) alongside FSCS January 2026 Budget Update for allocation details
- Submit feedback on proposed MELL by 10 February 2026 to PRA (email or 20 Moorgate, London EC2R 6DA)
- Budget for potential levy payments starting 1 April 2026, based on firm's share of PRA/FCA classes (see Appendix 4 in CP)
- Monitor post-consultation Policy Statement/Handbook Notice for final MELL confirmation
Key Dates
Compliance Impact
Urgency: Medium - Firms face predictable levy increases aligned with inflation, with levies allocated by business volume (minimal for small firms), but must act on consultation feedback by 10 February 2026 (today is 25 January 2026, leaving ~2 weeks). Matters for financial planning and budgeting, as MELL ensures FSCS operational funding without covering volatile compensation costs; failure to enga
Who is Affected
Summary
Consultation papers