The SIB yesterday warned that a pounds 100m annual limit on compensation payouts, made under the Investors Compensation Scheme, could be breached because of the mounting cost of redressing mis-selling victims of firms that have become defunct. Under the compensation scheme's rules, payouts are halted if the pounds 100m limit is exceeded. This would leave thousands of mis-selling victims with no means of redress.
The SIB yesterday tabled proposals to double the annual limit to pounds 200m. The new limit would apply only to those victims of defunct firms which came under the remit of the Personal Investment Authority (PIA).
In a consultation paper, the SIB is also proposing a safety clause in case the new pounds 200m limit is also breached. The safety clause would allow part of any particular year's compensation bill to be carried over to the next year.
Andrew Winckler, the SIB's chief executive, said: "The current proposals are being made as a precautionary measure in the interests of investor protection. It is prudent that we make timely provision to accommodate pensions claims."
Behind the proposals is a fear that the bill for mis-selling by 4,700 now-defunct firms may well exceed pounds 100m. So far, the regulators have identified 10,000 cases of mis-selling by defunct firms.
Many more victims have still to be contacted. Despite letters from the PIA, less than half of the 295,000 people who were sold pensions by the defunct firms have responded.
The PIA is also seeking to contact 33,000 people who have changed address. They can call the PIA on 0171 417 7001.