Godfrey Jillings, chief executive of Fimbra, the regulator of independent financial advisers, said yesterday he has a 'gut feeling' that as few as 3 per cent of the 500,000 people affected will need to be paid compensation.
This contrasts with the widely reported suggestion, based on an SIB- commissioned report, that up to nine out of 10 investors may have lost money by transferring their benefits out of occupational pension schemes into personal pension plans.
Mr Jillings said the SIB, headed by Andrew Large, had ignored his pleas to moderate the language used in the December report from KPMG Peat Marwick, the accountants.
'It has allowed the press to have a field day - I'm not blaming the press for that. I believe we have turned a problem into a crisis. A mountain has been made out of a molehill.'
The SIB acknowledges that the amount of bad advice suffered by investors is unknown, since KPMG's work was restricted to an analysis of often incomplete customer records. But KPMG found indications of suspect advice in more than a third of cases examined.
The KPMG report showed that, in 91 per cent of cases, life insurance salesmen and other financial advisers had collected insufficient information about clients to justify the advice to transfer to a personal pension. But it contained no information about how many clients had actually been wrongly advised.
An SIB spokeswoman said: 'It does show that there has been a gross disregard by (financial services firms) as far as completing documentation is concerned. It's a very serious matter.'
Mr Jillings said: 'The approach has been to exaggerate or to maximise the problem rather than to stand back, in a tempered way, and say what actually is the true position? There simply is not the information to say whether that 3 per cent estimate (of clients in need of compensation) is an accurate figure, or whether it's 5 or 20 per cent.'
Mr Jillings drew a comparison with the Bank of England's discreet handling of the liquidity crisis faced by many small banks in the aftermath of the collapse of the Bank of Credit and Commerce International. 'By the time it became public knowledge, there was no longer a crisis because of the way in which it had been handled.'
These concerns echo those of several life insurance and pensions companies, worried about an alleged lack of accountability in the investor protection system. The SIB's chairman is an appointee of the Chancellor, though the regulator must make an annual report to Parliament.
The SIB firmly rejected Mr Jillings's suggestion that the sample of Fimbra members considered by KPMG was in any way skewed towards problem firms. The SIB and KPMG are satisfied that it was a representative sample, selected randomly, of Fimbra firms conducting pension transfer business.