CP1/26 – Financial Services Compensation Scheme – Management Expenses Levy Limit (MELL) 2026/27
Executive Summary
The PRA and FCA have jointly issued consultation paper CP1/26 proposing to set the **Management Expenses Levy Limit (MELL) for the Financial Services Compensation Scheme (FSCS) at £113 million for 2026/27**, comprising a £108 million management expenses budget and a £5 million unlevied reserve. This consultation determines the maximum amount the FSCS can levy on authorised financial services firms to fund its statutory compensation scheme operations, directly affecting compliance costs for all regulated entities.
What Changed
The proposed MELL for 2026/27 introduces the following material changes: - Budget increase of £4.4 million from 2025/26 (from approximately £103.6 million to £108 million), broadly aligned with inflation - Nominal reduction of £6.6 million on a like-for-like basis when excluding the cost of enhancements to the FSCS's revolving credit facility (RCF) - Real terms reduction of £11 million when accounting for inflation adjustments - RCF enhancement to £3 billion to support the Bank of England's recapitalisation powers and enable faster depositor payouts - Unlevied reserve maintained at £5 million to provide flexibility for unforeseen costs The MELL covers ongoing operating costs including IT, staff, legal services, and claims handling expenses, but excludes compensation payouts which are lev
What You Need To Do
- *Review the consultation paper (CP1/26) in detail, particularly Appendices 3 and 4 detailing budget line items and PRA/FCA funding class allocations
- *Assess levy impact on your firm's 2026/27 budget based on your regulated business volume and funding class allocation
- *Prepare internal stakeholder communication regarding the £4
- *Monitor the FSCS January 2026 budget update for detailed cost breakdowns and compensation levy forecasts
- *Submit consultation responses if your firm wishes to comment on the proposal by 10 February 2026
- *Plan for implementation of any final MELL determination effective 1 April 2026
Key Dates
Compliance Impact
Urgency: HIGH
Who is Affected
Summary
Consultation paper 1/26