Hundreds of thousands of people may be affected by the proposed rule change to group personal pensions, one of the fastest-growing types of schemes in Britain today.
Under the new rules, insurers will have to tell policyholders if contributions already deducted from their pay packets are not paid in by their employers within three months of the date they were due.
Officials at the Department of Social Security moved to tighten up the law after hearing that some employers fail to hand over contributions for years at a time. If the firms were to go bust, those contributions could be lost.
The changes, still to be agreed by the Occupational Pension Board, follow discussions between the DSS and the City watchdog, the Securities and Investments Board.
Gareth Marr, managing director at the independent financial advisers Moores Marr Bradley, said: "Group personal pensions are increasingly popular because employers who want to provide this benefit for their employees do not have to go through the same rigmarole as with occupational pension schemes." He said he had recently spoken to Peter Lilley, the Social Security Minister, pointing out a gap which could be exploited by some unscrupulous employers. Not all insurers had rules in place to cope if this were to happen.
The Association of British Insurers said, however: "The principle behind the changes mirror procedures already in place with many of our members."