The compensation body said the cut was due to there being less SIPP providers failures and complex pension claims than expected.

Financial Planning firms will contribute £213.1m to the levy, a drop of £26.9m from the original forecast.

The FSCS had forecast an annual levy of £900m in November, with £240m to be contributed by advice firms.

There was a £128m decrease in compensation paid to customers in 2021/22 compared to the forecast, therefore the FSCS has been able to carry this surplus forwards.

The FSCS also said there has been a £162m decrease in its compensation forecast for 2022/23, including a £99m reduction in the investment provision class due to fewer SIPP providers failing than expected.

Whilst the headline levy number has decreased from the initial forecast, the FSCS said it still expects to pay more compensation than it did last year.

Caroline Rainbird, chief executive of the FSCS, said the levy enables the FSCS to continue to provide a ‘trusted compensation service that helps build confidence in the industry’.

She said: “We have faced criticism from some levy payers over the size of their FSCS levy bill in recent years, but these costs are only a symptom – driven by poor consumer outcomes and the compensation we need to pay out as a result.

“FSCS is keen to play a positive and proactive role in shaping the long-term future of the UK’s compensation regime, and we believe our submission [to the FCA’s Compensation Framework Review] demonstrates our commitment to being a leading and thoughtful voice in this important debate.

“I am very conscious of the impact paying out increasing levels of compensation has on the industry, as well as consumers, and we continue to call for changes that will help address the root causes – such as scams, poor practice, and gaps in financial education – so that the costs of the levy can be sustainably reduced over time.”

Towards the end of last year the FSCS also cut its 2021/22 levy to £717m from £833m.