FSA explains FSCS threshold system

The regulator says the new method will provide a ‘pool’ of £4.4bn of retail funding in any financial year, which would be available to compensate eligible claimants in the event of a significant default. Currently, in the case of default, the FSCS is only able to levy up to a designated pre-determined amount but is then forced to increase the amount each year if needed, to cover the cost of compensation paid. Under the new proposals - set out in CP07/05: FSCS Funding Review - each new sub-class has been given a threshold. For example, the sub-class of life and pension providers has a thre...