The Armed Forces Compensation Scheme for injury, illness or death as a result of service will replace war disablement pensions when it is introduced in the coming months.
Chris Underwood, head of campaigns at the RNID, said the Government had used "flawed" scientific arguments in devising the scheme, denying veterans the recognition they deserve.
"The new AFCS will only worsen the situation for deafened veterans," he said.
To support its own scientific evidence, the RNID is conducting research into the experiences of thousands of veterans affected by hearing loss to assess the impact of the new scheme.
The AFCS introduces a five-year time limit for claims from a single injury or, in the case of an illness, five years from the date when medical advice was first sought. It does not acknowledge the role of noise in accelerating the onset of hearing loss.
There are exceptions for some conditions, including certain cancers, but noise-induced hearing loss is not one of them.
AFCS payments will now be made in one-off lump sums, a policy the RNID warns will remove the flexibility needed to ensure that further hearing loss caused by service can be taken into account.
The RNID is also concerned that the current requirement to qualify for compensation is 50 decibels - in other countries, including Ireland, this ranges from 20 to 25 decibels.
Professor Adrian Davis, director of the Medical Research Council Hearing Group, who argued against the Government's criteria for compensating deafened veterans, said: "A hearing loss of 50 decibels or more is often only experienced by the elderly - the effects of such a loss are considerable."
The Reverend Peter Graham, 82, of Dorchester, served in the RAF from 1941 to 1945. During a flight over France in 1944, a shell exploded on the armour plate protecting his head. He was rendered stone deaf instantly, but his hearing quickly returned, and it wasn't until 1964 that he began to have hearing difficulties again. The AFCS would have failed him, he says: "I went for a hearing test and then to a war pensions tribunal.
The experts agreed that my hearing loss and tinnitus were caused by the big bang I experienced in 1944. I considered early retirement several times because of my deafness, but a better hearing aid always saved me from that. The compensation has obviously made a difference to my ability to continue working to the normal retirement age. If there had been a five-year cut-off point, I would have had nothing - that would have been absurd."