The Financial Conduct Authority told FTAdviser the target had been part of its initial thinking around reducing the regulatory cost for the industry but should not have been published in last week's consumer investments strategy.
It will now finalise its plans for reducing the levy, and a new target will be set out in a discussion paper later this year.
In last week's strategy paper the FCA said it was targeting a 10 per cent year-on-year reduction in the life distribution & investment intermediation and investment provision funding classes over five years, from 2025 to 2030.
It said the two funding classes were responsible for the bulk of recent cost increases.
Debbie Gupta, the FCA's director of consumer investments, explained to FTAdviser the regulator was looking to stabilise the levy with respect to historic cases, which was why reductions were not going to happen until 2025.
But within days it emerged the FSCS had not played a part in setting this target.
FSCS chairman Marshall Bailey told FTAdviser last week: “10 per cent is the FCA’s number, I don't know if that's right or wrong, we weren't part of the calculation of that forecast, and probably we don’t want that precision."
Though he agreed the direction of travel set by the regulator was the right one.
The FCA is looking to cut the cost of regulation through a series of measures, such as addressing poor advice, higher capital standards and FSCS funding.
It is also exploring ways to guide consumers towards mainstream, well-diversified products, as opposed to high-risk investments.
The regulator is still reviewing the compensation framework and plans to publish a discussion paper later this year.
The FSCS currently estimates that its compensation levy costs for the 2021-22 financial year will be £833m, up 19 per cent on 2020-21.