The Financial Services Compensation Scheme has cut its 2023/24 levy for the Life Distribution & Investment Intermediation class - which includes financial advisers -by £4.4m.

The change represents a 4% drop in the total levy for the class.

The FSCS has dropped its total annual levy for all classes in 2023/24 to £270m, according to its May outlook published today.

The updated levy is 44% lower than the indicative levy published in the compensation body’s November outlook report.

It is a 57% drop year-on-year, with the final 2022/23 levy which was £625m.

The FSCS said the lower levy was due to £97m of lower compensation costs in 2022/23, which has created additional surpluses.

It said that one of the reasons for lower claims was due to the training of additional pension claims handlers and fewer upheld claims, as well as some investment class claims now expected to fall into 2023/34.

The compensation body said most surpluses will be utilised in the 2023/24 financial year.

There has also been a decrease of £121m in compensation forecast for 2023/34.

The investment provision class has seen a £67m reduction in forecast compensation, mainly due to fewer SIPP operator claims now expected and some claims moving into 2024/25.

The compensation body cautioned that although the levy has decreased, it still expects compensation costs in 2023/24 to be high at around £471m.

For the life distribution and investment intermediation class, which most financial advice firms belong to, the total levy to be applied for the 2023/24 financial year has decreased £4.4m to £101.1m.

The decrease in the levy comes despite the forecast compensation for the class rising to £212.8m from the £209.5m forecast in November.

The other main changes in the levy forecast for the intermediation class include a £21m reduction relating to the compensation costs for complex pension claims, alongside a £20m increase across other products mainly driven by SIPP advice claims.

Caroline Rainbird, chief executive of the FSCS, said: “The advice market continues to drive most of the claims we see. Now sitting at £213m, Life Distribution & Investment Intermediation is the only class that has seen its compensation forecast increase slightly since November’s outlook.

“We expect some of the compensation in this class will be paid to former members of the British Steel Pension Scheme, where their advice firm has already failed. The FCA’s redress scheme for these former members is now up and running and, by the end of this year, those firms that are still in business should pay any redress they owe.”

The FSCS added that it has already invoiced firms £242m for payment of the 2023/24 levy. Those firms that have already made an advanced payment in March will have any applicable credit applied to their account in the summer.