Financial service companies face a bill of more than £1bn this year from the lifeboat scheme, to fund compensation for the collapse of London Capital & Finance as well as customers hit by pandemic-induced business failures and pension scams.

The Financial Services Compensation Scheme (FSCS) forecast a levy of £1.04 billion for 2021-2022 on Friday, marking a 48pc rise on last year's figure. The levy is compulsory for all firms regulated by the Financial Conduct Authority.

The FSCS is funded by banks, insurers, asset managers and financial advisers. If a firm fails in one of the sectors that funds the scheme and cannot pay customers' claims, they are able to seek compensation from the lifeboat.

A further £44.5m will also be invoiced in early February, increasing the current levy for the 2020-2021 financial year to £700m.

The increased bill comes as the FSCS said it expects a 72pc rise in claims in 2021-2022, compared to the previous year, driven in part by the collapse of London Capital & Finance (LCF).

It also predicts more compensation to be claimed over increased business failures due to the pandemic taking a toll on the economy, and failures in the pension sector.

Chief executive Caroline Rainbird said: "Over the coming year, we anticipate an ongoing rise in complex pension advice claims and further failures of self-invested personal pension (SIPP) operators."

"We also forecast an increase in pay-outs for the insurance provision class due to recent failures. Furthermore, due to the widespread economic impacts of Covid-19, we are also, unfortunately, anticipating an increase in failures across the industry."

Earlier this week a High Court in London was told retail investors - who lost £236m in the collapse of mini-bond provider LCF in 2019 - are entitled to payouts that had been refused to them by the lifeboat.

A judicial review is still underway over the the FSCS's decision to compensate only a fifth of the 11,600 customers. It may have to pay more than 10,000 investors if the High Court rules in favour of the claimants.

Ms Rainbird added: "I want to reassure you that we are doing everything in our power to reduce the levy", adding that the organisation has been working with regulators to tackle fraud and scams.