Policyholders are to bear the brunt of the spiralling cost of the pensions misselling, according to a leading commercial law firm.
Reynolds Porter Chamberlain has calculated the pensions mis-selling review is costing £1.25 for every £1 compensation it generates
The startling findings were revealed at a City conference on Professional Negligence.
The cost of administration for phase one has been estimated at £2.5bn and yielded just £2bn in compensation for those wrongly sold a personal pension.
Partner Jonathan Davies says: "Evidence suggests that 90 per cent of the costs and compensation paid by policy providers is being charged to policyholder funds with only 10 per cent being paid from shareholder funds. For mutual life offices the situation is worse with all of those costs having to be paid by innocent policyholders."