Mr Bailey announced yesterday that a new product levy is to be considered as part of the review of the FSCS.

The PFS told Financial Planning Today it had been discussing the subject with the regulator prior to this announcement and welcomed the news – especially after the product levy appeared off the table when the review began earlier this year.

PFS chief executive Keith Richards told FPT: “The FCA’s review of the FSCS levy, which started in May, deemed the recommendation of a possible product levy as out of scope.

“The Personal Finance Society subsequently wrote to the Chancellor, seeking the Treasury’s support from a public interest perspective, to broaden the review to include all possible alternative funding options rather than simply reshuffling the levy deck chairs.”

He said: “The review of the unsustainable FSCS funding mechanism was discussed in a recent meeting between myself and FCA chief executive Andrew Bailey, including the potential for both a product levy and a combined PII solution.”

Mr Richards said: “The Personal Finance Society is not saying that either of these options should necessarily be favoured over other alternatives, but we feel strongly that the details of each should be further investigated as part of a broader review of the FSCS levy.

“It is encouraging that the FCA and the Treasury are extending the review to ensure the product levy is considered as part of the regulator's upcoming consultation on FSCS funding.

“We would like to see a solution that creates both improved consumer protection as well as a much greater degree of certainty of cost for the advice profession.”

Mr Bailey said the FCA was looking at “the possibility of risk-based levies related to the products or services a firm offers, its capital reserves or complaints reported”.

He said: “We are aware that some sectors of the industry are keen to fund the FSCS through a product levy, and we will be considering this proposal in our consultation.”

A number of other possible moves were flagged up, including changes to FSCS compensation limits. This could mean an increase to limits in certain areas, "in order to better protect consumers that manage their pension accumulation or, in particular, decumulation outside of traditional life insurance products".

The FCA is looking at the relationship between FSCS funding and the professional indemnity insurance held by firms, in particular whether a separate review is required of the PII market.

Other potential moves include “smoothing firms' levy contribution by, for example, merging certain funding classes or through more extensive use of the FSCS credit facility”.

The FCA plans to publish a public consultation paper at the end of November outlining a range of proposals to “enhance the current funding model”.

Final rules should be in place by the summer of 2017, with the new arrangements taking effect from the 2018-19 levy year, Mr Bailey said.