The cost could be £6.65bn, it will take until the new millennium to get it finished and some firms are bound to go to the wall as a result.
After months of silence, the Financial Services Authority and the PIA have finally come up with proposals on how to deal with the estimated 1.8 million non-priority investors who may need a pension review.
FSA chairman Howard Davies has publicly stated his intention to have the whole shoddy episode dealt with by the end of the century. On past form, this is likely to be a hard task – it is almost three-and-a-half years since KPMG's original probe for SIB on pension misselling.
But this time it will not just be companies as a whole which could find themselves facing the wrath of the regulators. Life-office directors and principals of IFA firms are in the firing line following the advent of individual registration. They could be fined or thrown out of the industry.
PIA chief executive Roger Bright gave a clear warning that disciplinary action is a real possibility for those found individually culpable.
The FSA/PIA research shows that 1.8 million investors are estimated to fall within the scope of the second stage of the review. Estimates for actual redress payments range from £3.35bn to £5.8bn. The bill will be swollen by admin costs, thought to be between £520m and £750m.
Bright says: "This may cause difficulties for some firms. We believe it is manageable and will allow them to see the end within a reasonable timescale."
A major ad campaign is planned and the industry will be expected to foot the bill. Letters will be sent to investors inviting them to take part, then there will be follow-ups and reminders. Those requesting reviews will have to fill out a questionnaire.
Bright says: "This will be led by the regulators and paid for by the industry. It is in their interests to do so."
Deadlines are also going to be tough. Bright says bigger firms will be given individual targets, just as for priority cases, which may be well in advance of the final date.
Research for the FSA's consultation document was carried out by Price Waterhouse and it includes a corroborative statement from Bacon & Woodrow. It surveyed seven firms to draw up the conclusions.
Consultation will end in mid-May. Major firms must then come up with plans to deal with the review. The general deadline for the first phase of contacting investors will be May 31, 1999.
The paper estimates that small IFA firms face an average of about 2.1 phase-two cases per registered individual compared with 1.8 priority cases per RI. It says small IFAs' admin costs are not likely to be out of line with the rest of the industry.
A major fear for IFAs has been the issue of PI cover. One of the issues to crop up when the IFA Association and PI provider LIBM challenged SIB's pension transfer guidelines in 1995 was whether IFAs would invalidate their PI insurance if they invited clients to query past advice.
The document tries to reassure IFAs. It says: "Consistent with the approach adopted for the priority review, the FSA confirms that proposals put forward in this consultation paper are not intended to require any firm to take any step which will invalidate its insurance cover without its insurer's consent.
"The PIA sees no case which would necessitate a different approach for firms with professional indemnity cover and proposes that the terms of the model guidance for phase 2 should be applied to all firms regulated by the PIA."
LIBM managing director Tony Howe says: "It seems like good news for IFAs. It sounds like they will review cases on request after two letters. I suspect that the compensation estimates are grossly exaggerated and admin costs under-exaggerated."
Nevertheless, even for firms covered by PI insurance there could still be a heavy cost. The PIA is currently considering 10,000 priority cases from defunct IFA firms. The Investors' Compensation Scheme bill for this could be as much as £80m.
Bright says it is impossible to say how much the next phase will cost the ICS but the bill is likely to be big too.
Another controversial element of the plans is the prospect of the PIA allowing more firms to offer guarantee schemes. Pension lawyers have expressed grave concerns about the schemes, arguing that they have no legal force.
But PIA senior policy officer Brenda Gibson says: "We don't approve guarantees unless we are satisfied they are enforceable. We will look favourably on new requests."
Bright says: "As the front-line regulator, the PIA is fully geared up to monitor and enforce this stage – we are poised to take that forward."
Unsurprisingly, Treasury economic secretary Helen Liddell has welcomed the document. She says: "This is the only way to see that the final policy adopted is the best way forward in the interests of the investors and ultimately in the interests of the industry."
Pension review, P22
The ABI says its rescue package for IFAs will be operational by the autumn.
The scheme is expected to offer both financial and admin help for IFAs amid widespread concern that small broker firms lack the resources and expertise to deal with the review.
But the PIA is warning IFAs that they must not drag their feet on the review and face the threat of fines if they do.
The ABI's announcement was made following the release of the FSA's consultation document on non-priority cases.
The move has been warmly welcomed by PIA chief executive Roger Bright, who has expressed concerns about IFAs' slow progress.
But Bright warns: "As far as IFAs are concerned, it is not part of our agenda that we should want to put them out of business. But the fact of the matter is investors who were missold pensions need their cases reviewed and to have redress. We will be even-handed in the application of our requirements and, if necessary, of discipline."
ABI director general Mark Boleat says: "Product providers have no responsibility for independent financial advisers. However, the ABI has been working with regulators to study the performance of IFAs' in the review and to advise on how they could make better progress. Agreement in principle has been obtained from product providers to such a scheme and this is a big step towards the total completion of the pensions review."