UK - Pension funds which demand unlimited liability from advisers must be prepared to pay higher fees, a leading actuary says.
PricewaterhouseCoopers partner Peter Tompkins’s comments follow accusations from pension funds that actuaries are using liability caps to side-step their responsibilities.
Pension funds have also warned that such caps would force some to reconsider their provider.
But Tompkins estimated that the associated insurance costs for open-ended liability contracts would cost pension funds at least £10,000.
He said: “Professionalism requires us to protect ourselves and our staff as much as the clients and the responsibilities we take on. But in protection, we have to bear in mind the costs we are subject to with insurance.”
PwC, Hewitt Bacon & Woodrow and Watson Wyatt are all known to be imposing liability caps on their services while Mercer admits it is seriously considering the shift.
Tompkins said the larger firms do not have the built-in liability caps unlike smaller actuarial firms. “Bigger firms are often seen as easy targets to lash out at when things go wrong.
“People don’t sue their high street dry cleaner because the legal costs are bigger than what you get back.”
A Watson Wyatt spokesman agreed: “In today’s environment, professional service providers cannot afford to be exposed to vague or unlimited liability.
“The immediate search for the deepest pocket is a sad but more usual state of affairs in the event of something going ‘wrong’.”
The spokesman added that terms of engagement which limit liability to reasonable sums not only allow firms to manage their risk properly, but also ensure that firms remain viable and can continue to advise clients in the event of a claim.
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