Lloyds TSB is increasing its provision against the mis-selling scandal to just over pounds 800m, to include administration costs.
So far, Lloyds TSB has compensated 45,000 people wrongly advised to choose personal pension plans over occupational schemes, at a total cost of pounds 388m. It estimates that an additional 40,000 of the least urgent cases are still to be dealt with.
The move follows a revision by the Financial Services Authority on life expectancy and economic assumptions. "Accordingly, the board has agreed that a provision of that amount will be included in the profit and loss account of the Lloyds TSB Group for the year ending December 1999," the company said.
Other institutions say they are working to the same assumptions as Lloyds TSB, and provision against the mis-selling scandal is under constant review. Any formal changes to provision have to be formally reported.
Insurers and banks are having to put aside increasing sums to cover the cost of the mis-selling scandal because experts believe policyholders will live longer into retirement than originally thought.
The FSA admitted that even its upper estimate of pounds 11bn now looks inadequate. In recent months, it has revised downwards its long-term forecasts for interest rates and inflation and revised up life expectancy, both increasing the shortfalls that would be experienced by those mis-sold a personal pension in the 1980s and early 1990s.
The existing calculation - which suggests the compensation bill will come to between pounds 8bn and pounds 11bn - is now out of date. Sarah Wilson, head of policy for the pensions review at the FSA, said life expectancy assumptions were raised by two years in August to reflect the latest "best estimate" of demographic experts.
But economic assumptions are revised on a quarterly basis and it is impossible to pin down a final total for compensation.
"What actually gets paid depends on the time the company carries out its pensions review," she said.