UK - Trustees are facing an unquantifiable bill to cover death benefits for thousands of reservists that could be called up for a war against Iraq.
It is feared that many schemes’ insurance policies do not cover the death or widows benefits of a reservist killed in action.
This could leave trustees open to mass payouts and put a serious strain on scheme funding, according to the Confederation of British Industry.
Pensions officer Jamie Bell said that this issue is being “heavily debated” with insurance companies, but at the moment schemes look liable to pay for these benefits.
He said: “There is a good chance that employees expect that the cover they are receiving through work will be valid and their partners would be provided for.
“This is a real concern at the moment as it would appear that the insurance companies won’t pick up the bill. Insurance companies have been saying that it is not in the remit of their job.”
Hammonds partner Chris Jackson stressed that trustees must act now to identify any members who are reservists and check the position with the insurer as the lack of cover would give rise to funding issues.
He warned: “Trustees may be liable to pay out if the member on military service is covered for death in service cover, whether or not the insurance pays out.”
But he stressed that it is still uncertain whether staff pensions rights continue in the event of them being called up to the armed forces.
Reservists consist of regular and volunteer reserves of the Royal Naval Reserve, the Royal Marines Reserve, the Territorial Army and the Reserve Air Forces.
Electricity Supply Pension Scheme secretary Tony Allan said this dilemma is of particular relevance for newer schemes whose rules were drafted after the abolition of National Service in 1958.
He said it is likely that newer schemes will have no “Approved National Service” provision in the trust deed and rules.
Legal & General group risk director Jane Dale stressed that many reservists should be covered, but each person would be dealt with on a case-by-case basis.
Enhanced powers for The Pensions Regulator (TPR) to prosecute and fine company directors who "wilfully or recklessly" put their defined benefit (DB) pension scheme at risk will be hard to enforce, commentators say.
Melrose has pledged to contribute up to £1bn to GKN's pension schemes as part of a final offer to acquire the engineering business.
Existing master trusts will be forced to pay £41,000 when applying for authorisation under the upcoming regime, the government has confirmed.
UPDATE 2 - DWP publishes DB white paper: Stronger powers for TPR, DB chair statements to be introduced
The Pensions Regulator (TPR) will be given the power to fine company bosses who deliberately puts their defined benefit (DB) schemes at risk, the government has confirmed.