The Financial Services Compensation Scheme (FSCS) has slashed its annual business levy to £270m this year following a large surplus last year.  

The body, led by chief executive Caroline Rainbird, set the new levy for firms in its May update, which has tumbled from an estimate of £478m in its November update.  

It says it expects compensation costs to come in at £471m in the 2023/24 year, sustainably lower than the £625m bill last year.  

The body says the reason its current estimate is £208m lower is due to reduced compensation payments across a range of areas such as life distribution & investment intermediation and general insurance provision.  

The FSCS’ Rainbird says: “This is a significant reduction from the initial estimates that we shared in November, however, in total, we still expect to pay £471m in compensation this year — the sixth year in a row that we are close to or above £500m.   

“The gap between the compensation we expect to pay, £471m, and the levy we need to charge, £270m, is covered by the surpluses that we are carrying over from last year.”