The FSCS, a compensation fund for customers of authorised UK financial services, said the levy has been driven by claims relating to advice by financial advisers to transfer funds from existing pension schemes into self-invested personal pensions (SIPPs).
This comes alongside its new ability to compensate claimants for losses in the value of investments held in SIPPs.
Many of the claims have arisen from a retail investor’s SIPP fund being invested into inappropriate, non-standard asset classes which have subsequently become illiquid, such as offshore property schemes.
Companies will start to receive invoices for their share of the levy from 23 March and will have 30 days to pay the invoice. They can also use existing credit facilities to spread the costs of the levy.
Mark Neale, chief executive of the FSCS, said the fund has a duty to pay compensation claims as they arise in order to promote consumer confidence.
“The costs of SIPPs claims are rising so we have no choice but to issue this levy to the firms that pay for FSCS protection,” he said.
“In January this year we advised the industry that the volume of claims could increase. We also indicated the forecast compensation costs could materially increase if FSCS compensated for investment losses. This is now the case.
“I know this will be unwelcome news for firms facing a supplementary levy. We will continue to do all we can to provide more certainty for firms but we cannot entirely eliminate volatility in what is a pay-as-you-go fund arrangement.”
Set up in 2000 under the Financial Services and Markets act, the FSCS is an independent body that pays compensation to consumers if a firm is unable, or likely to be unable, to pay claims against it.
In December last year, it recovered £100m in compensation for the failings of life settlement firm Keydata.