FSCA's Proposed Levy Increase for 2025/26: What Financial Services Providers Need to Know
The Financial Sector Conduct Authority (FSCA) is planning a 5% increase in levies for the 2025/26 financial year. This new proposal, announced on October 28, 2024, aims to help cover operational expenses while keeping increases moderate. The FSCA has also laid out its budget for 2025/26, alongside expenditure estimates for the next two fiscal years.
While the FSCA recently raised fees for supervisory services by 6%, it won’t be adjusting those further in 2025/26. This slight relief will balance the incremental increases, with levies being the primary funding mechanism for various regulatory and oversight bodies, including the Prudential Authority, the FSCA itself, the Ombud Council, and the Financial Services Tribunal.
Why the 5% Increase?
Under the Financial Sector and Deposit Insurance Levies Act, levies can increase based on the previous year’s Consumer Price Index (CPI), which was recorded at 6% by Statistics South Africa in December 2023. While the FSCA is entitled to raise levies by this rate, it has opted for a slightly lower increase of 5%, aligning with its planned expenditures for the year.
The Minister of Finance retains authority to approve this increase or suggest a CPI-aligned adjustment through notice in the Government Gazette.
Updated Levy Structure: How It Affects FSPs
If the 5% increase proceeds, different categories of Financial Services Providers (FSPs) will see new base levy amounts:
Category I and IV FSPs: Base levy will rise to R4,006.80, up from R3,816.
Category II, IIA, and III FSPs: Base levy will increase from R7,950 to R8,347.50.
Per Representative and Key Individual (KI): For most FSPs, this amount will increase to R578.76, although for certain FSPs offering only long-term insurance or friendly society benefits, it will remain at R250.
Additionally, for Category II, IIA, and III FSPs, levies based on assets under management will increase from 0.0019711% to 0.0020697%. The cap on maximum levies for any FSP category will increase from R2,650,000 to R2,782,500.
Proposed Increases from Other Regulatory Bodies
The FSCA levy is only part of the broader regulatory expenses for FSPs:
FAIS Ombud: Proposing a 4.6% increase in per KI and representative amounts, keeping the base levy at R1,100.
Pension Funds Adjudicator: Suggests a 4.7% increase, raising the levy per eligible member from R10.38 to R10.87.
Ombud Council: Levied as a fixed 2.5% of the FSCA levy.
Financial Services Tribunal: Levied at 2.65% of levies paid to the FSCA or Prudential Authority.
With the special levy imposed after the 2023 Financial Sector and Deposit Insurance Levies Act ending in the 2024/25 fiscal year, the 2025/26 year offers some relief from those extra charges.
2025/26 Budget Overview
The FSCA’s budget anticipates a revenue of R1.099 billion, with levies providing the majority at 92%. Operational expenditures are set at R1.125 billion, primarily driven by R800 million for staff and R325 million for general expenses.
Expanding the Supervision Scope
To cover new areas of financial oversight, the FSCA plans to ask the Minister of Finance to amend the Levies Act to include:
External Counterparties and Trade Repositories
Credit Rating Agencies
Benchmark Administrators
These entities are set to fall under the FSCA’s regulatory scope, with pension fund classifications also undergoing adjustments to better reflect the diversity of funds the FSCA oversees.
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