UK - Trustees could be on the hook for liabilities up to 15 years after a buyout has occurred if they fail to take adequate insurance cover, lawyers warn.
Hammonds partner Clifford Sims (pictured) said trustees should get both overlooked beneficiary insurance and run-off cover in advance of a full scheme buyout, or risk being responsible for liabilities that creep out the woodwork at a later date.
He said after a buyout and scheme wind-up two factors prevent trustees from indemnity - the employer is unlikely to exist any more and the scheme assets will have passed on to the buyout company.
Sims explained: "The danger is at that point the employer no longer exists and any expense incurred in defending a claim the trustees would have to meet themselves - without insurance cover or a sponsoring employer who can indemnify them."
Overlooked beneficiary insurance covers trustees for any beneficiaries who appear after the scheme has been wound up, while run-off cover protects for any liability the trustees come across as a result of decisions they made in the past.
Insurance broker Marsh FINPRO Practice - part of the Mercer group - senior vice president John Batch said: "Overlooked beneficiary insurance is only generally available for a maximum of eight years because there is a limited market for that type of cover - as there are typically two insurers.
"It can be renewed but there is no guarantee that insurers will be offering the cover in eight years' time."
He added: "There are insurers prepared to cover for pension trustee run off for 15 years but traditionally insurers have been uncomfortable in providing run-off periods of longer than six years."
Sackers partner Helen Baker added: "A useful feature for cover to have is to fund trustees' legal expenses as it is often one of the first calls on trustees. Typically there is an option to have legal fees met or not in the policy."
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