The Financial Services Authority gave insurance companies until December to come up with a plan to compensate policyholders who may have been mis- sold pension top-ups.
But consumer groups and employers were yesterday angry that compensation was confined to a "tiny proportion" of the one million people who bought policies.
The review follows an investigation by the FSA into the top-ups, known as free-standing additional voluntary contributions (FSAVCs). The investigation found a strong risk that mis-selling had taken place in two categories of top-up policy: those where employees missed out on a contribution from their employer, and those where Inland Revenue rules were broken.
But consumer groups fear this will deny compensation to hundreds of thousands of employees who may have been mis-sold. Actuaries say the vast majority would have been better off buying top-up pensions from their employer.
Mick McAteer, senior policy officer at the Consumers Association, said: "All the research that has been done tells us that in almost every single case the average person would have been better off [with their employer's scheme]. If it is limited to just a few of the policies, that is disappointing."
Insurers yesterday suggested they had been vindicated by the regulators after the FSA said "at present, we have no evidence of general mis-selling".
But the FSA also said key documents, needed to determine whether sales people had acted properly, were missing from insurance companies' files.
Jenny Rosser, who runs the British Airways pension scheme, raised the matter with Helen Liddell, then a Treasury minister, earlier this year.
"I am disappointed. I had to write to the Government to get the regulator to even show an interest. They may not have evidence of widespread mis- selling, but clearly there is evidence."Reuse content