The money advisers pay towards the Financial Services Compensation Scheme is the price of consumer choice, the body's chief executive Mark Neale has said.
The head of the FSCS said giving consumers informed choices about their finances would help them avoid risks but he said there would inevitably be some risk.
This, he said, was why FSCS protection was necessary, citing the example of the recent surge in claims for self-invested personal pensions.
Mr Neale said: "We expect around 30 per cent of all non-deposit and non-insurance claims to FSCS this year to be Sipp-related. These claims will result in compensation costs this year of around £130m.
"These are costs that will be met by FSCS’ levy payers and must therefore, be pooled fairly across the industry."
He acknowledged that the recent news the FSCS would need to raise a supplementary levy of £24m this year because of the continuing rise in Sipp claims would not be "especially palatable" but he said it was the price for greater choice.
Mr Neale said: "Choice gives welcome flexibility to invest retirement savings in ways which reflect consumers’ risk appetite and preferred life style.
"Those choices are mostly exercised prudently. But we do need to protect consumers, who cannot readily replace their retirement savings, against occasional examples of bad professional advice."
He warned of the consequences of not giving consumers and of there being too much protection for investors or not enough.
Mr Neale said: "Risks arise equally if investors assume they’re protected when they’re not, or assume they’re unprotected when they are.
"The first leads to over-confidence and imprudent risk-taking; the second to the needless avoidance of products which may have a useful role to play in planning for retirement."
The annual levy limit in the life and pensions intermediary class is £100m, which the FSCS raised in April.
The scheme's latest annual report out last July showed compensation paid to investors holding their pensions in Sipps went up 35 per cent to £105m in the year.