Retiring IFAs could be bankrupted by fines up to 30 months after they leave the industry following the introduction of individual registration rules.
The PIA has imposed the 30-month rule because it says most misselling cases come to light after an independent adviser has left a firm.
The problem will be made worse by professional indemnity insurers refusing to cover individuals fined by the PIA.
Insurers claim that it would be wrong to give cover for fines covering rule breaches.
As a result, retired independent advisers will have no insurance cover and no business capital to pay a fine.
The IFA Association is seeking an urgent meeting with the PIA over the issue.
Individual registration will be introduced in October. It will allow the PIA to fine brokers for compliance failures. Company directors of big IFAs and life offices will be individually registered from May.
IFAA chief executive Garry Heath says: "This could cause a real problem for retiring IFAs. We are very keen to talk to the PIA about this to find out what they intend."
Riach Independent Financial Advisers proprietor Bob Weir says: "It is frightening. It is justified if there has been a case of blatant misselling but for things like the pension review, where they changed the goalposts, it is unfair."
Houghton Associates managing director Alex Houghton says: "It could badly affect your retirement capital."
PI insurer LIBM has announced substantial supplementary calls for 500 IFA members of its scheme from 1992/ 93 to 1996/97. The calls range from an extra 20 per cent for 1992/93 to 75 per cent in 1996/97. LIBM blames an "extraordinarily high" number of claims, mainly due to the pension review. It is planning to let members make payments in instalments.