Howard Davies, head of the Financial Services Authority (FSA), launched the second phase of the mis-selling review. So far, financial watchdogs have concentrated only on the most urgent cases. Now the regulators have turned their attention to the less urgent cases - most of which involve the under 35s - and have issued a consultation paper which sets out how to take the process forward.
Mr Davies reckons the second phase of the review will cover as many as 1.8 million investors - around 300,000 more than previously thought. The FSA estimates that pension mis-selling could have cost members of this second class of investors between pounds 2,250 and pounds 12,000 each.
Helen Liddell, economic secretary to the Treasury, said she found it "alarming" that so many people could be affected by the second stage of the pensions review.
Ms Liddell's tough approach to the mis-selling scandal in recent months is believed to have been instrumental in spurring some of the less co- operative pension companies into action.
The financial services regulators began their review of pensions mis- selling back in 1994 amid growing concern that investors could have been wrongly persuaded to switch from occupational pension schemes into personal pension plans. The regulators initially concentrated their efforts on "priority cases" - typically people at or near retirement and investors who had died before receiving recompense.
The regulators soon realised that the scope of the scandal was far greater than first thought. The first phase of the pensions review eventually covered 640,000 people and is likely to cost the pensions industry a total of pounds 4.5bn. Phase one is "now approaching completion", according to Mr Davies.
Mr Davies plans to launch a multi-million pound advertising campaign to raise public awareness of the second and final phase of the campaign. He said the campaign would be paid for by the pensions industry "either on a voluntary basis or by regulatory levy".
The FSA chief added that he hoped progress in phase two of the review would be far faster than phase one. When the scandal first broke, pension companies initially dragged their heels and progress was impeded by extensive legal wrangling over liability.
Under the terms of the consultation paper launched by the FSA, companies will be obliged to write to affected investors and ask them to provide some basic details about their case. Companies will also have to chase investors who fail to respond and provide a preliminary assessment of the extent of the problem by the end of March next year.
At that point, the FSA will then set targets for each pension company for completing their reviews, and will monitor progress on a regular basis. As in the first phase of the review, companies which fall behind schedule could be "named or shamed" or may find themselves facing hefty fines. In addition, from the summer, the regulatory bodies will have extra powers to bar directors from conducting business in the financial services industry.
Total costs of this second phase are likely to range between pounds 3.8bn and pounds 6.5bn, Mr Davies said. Most - if not all - pension companies have yet to make financial provisions for dealing with this second tranche of cases.
The industry broadly welcomed FSA's move. Companies have until 15 May to respond to the consultation document.
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