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.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.