Each group of victims to have its case examined will depend on age, closeness to retirement and whether the individual was in one of three distinct groupings identified as important by the SIB.
The initial report was aimed at so-called transfers, cases in which people no longer working for a certain employer moved their occupational pensions into a private scheme. These are known to number 600,000 out of the 7.75 million personal pensions set up since 1988.
However, a survey carried out on behalf of the SIB by Bacon & Woodrow, the firm of actuarial consultants, has revealed a far more extensive problem than expected.
The survey, published yesterday alongside the report, suggests that a further 450,000 people were specifically advised to opt out of the company pension scheme they were already in and set up a private one.
A further 1 million people were eligible to belong to their scheme. About half that number were advised not to and also set up personal pensions.
The seriousness of these last two categories is made worse by the fact that workplace schemes often receive extra contributions from employers. Advising someone not to belong to them risks a large financial loss for that individual.
Andrew Large, chairman of the SIB, said: 'It is now clear that far too many personal pensions were sold in the past, sold on the basis of advice that fell demonstrably short of the regulatory standards in force at the time.
Under the action programme, firms will review their past business and, where necessary, put things right for their investors.' The SIB proposes that companies deal with their most urgent cases by the end of December 1995, with the second tranche of complaints being dealt with in the following 12 months.
The basis under which compensation is paid out will depend on whether there was a breach of the rules by the firm whose pension was sold, whether this caused a loss to the investor and what its scale was.
Rule breaches will include failing to take reasonable steps to find out what an investor needed and advising accordingly, failing to explain risks involved and failing to give adequate information.
Although rules on advice have been tightened in recent years, the SIB stresses that these core requirements, including the need for accurate recording of information by companies, have always applied. Where advice to opt out of a company pension scheme was given, the presumption will be that this was bad advice, unless the salesman can prove otherwise.
Mr Large declined to give a figure for the likely scale of compensation.
'Because we cannot be certain of the extent of improper selling at this stage and because the amount of redress will vary from case to case, it is impossible to give a meaningful estimate. I am not a clairvoyant.'
He promised that the SIB would monitor the speed and thoroughness with which cases were being sorted out.
The SIB has published a leaflet on pension transfers and compensation, available from libraries and Citizens' Advice Bureaux. A pensions helpline has also been set up by the new Personal Investment Authority, on 071-417 8100.Reuse content