The recent levy imposed by the Financial Services Compensation Scheme (FSCS) following the collapse of Keydata and other firms could drive some SIPP firms to either merge or be forced to pass on the cost to their customers, according to Suffolk Life.

Following the recent announcement by the FSCS, Suffolk Life has received a significant number of enquiries from both advisers and investors about the cost of the recent levy. However, the SIPP provider said it has never passed on any levy charges to clients in the past and will not pass on the costs of the Keydata levy.

Greg Kingston, head of marketing, commented: “Considering the current economic environment and regulatory and financial strains being placed on firms, consolidation across the SIPP market is now more likely than ever before.”

He added: “With the likelihood of consolidation in the SIPP market now markedly increased, advisers need to be sure that the SIPP provider they recommend today will still be the same in the future.”

On Friday, principal of MoretoSIPPs, John Moret, said that at the end of 2010 there were well over 700,000 SIPPs with assets totalling £99.3 billion. He added that, based on market movements in 2011, he was confident that had now broken through the £100 billion threshold.

Moret based his own ‘survey of surveys’ on the results of trade magazine surveys and other market data. His survey covers almost 90 SIPP operators. He added: “However there are well over a 100 regulated SIPP operators so the survey results may well be an underestimate. What the results demonstrate is that in terms of customers life companies continue to dominate with over 400,000 SIPP clients.”

He concluded: “I foresee a growing battle in the next few years between platforms, insurance companies and a few independent providers for control of the SIPP market – and legacy pension assets – particularly as the regulatory overhead continues to increase. There must come a point soon where some smaller providers conclude that it is no longer worth staying in this market.”

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