The recent crises for BHS and Tata Steel pensions schemes should be a "wake up call" for people with final salary pensions.

That's the warning from the CEO of deVere Group, Nigel Green, who says there is no room for complacency around the risk burgeoning deficits pose to retirement funds.

Green's comments come as BHS becomes the latest major British firm to collapse with huge pension burdens, and after the government launched a consultation into how Tata Steel can separate from the British Steel Pension Scheme (BSPS) in order to sell.

Green says the much-publicised problems surrounding BHS and Tata Steel pensions schemes should serve as a timely wake up call.

He said: "The Tata Steel case underscores what we have been saying for far too long: that many of the laws surrounding DB pension provision are outdated and no longer of an acceptable standard – in short, they are not fit for purpose in today's world."

"Unfortunately, the myth that final salary schemes are guaranteed is alive and well and more than 50 per cent of new or potential clients fail to fully appreciate how the pension deficit crisis could have devastating financial consequences for their retirement."

Green believes the reality for many final salary schemes is that they are "on the edge of an abyss" and many firms can no longer afford retirement packages that link pensions to earnings, becoming unsustainable.

"Sadly, it is unlikely that there will be a monumental step away from the abyss for many of these schemes," he said.

In contrast to Green's warnings, independent trustee and governance services provider PTL says it is vital that neither the government nor the industry have knee-jerk reactions.

In the early 2000s, a few high profile business collapses meant pension rights were lost by some workers, which led to the development of the Pension Protection Fund.

PTL managing director Richard Butcher said: "We are only a couple of weeks into the BHS saga but already the story is starting to sound like a script from a pension disaster movie."

Butcher added that the impact of such close scrutiny would be a "tougher, far rougher round of funding negotiations" for everyone in the DB funding process, from trustees, to employers and the regulator.

First published 09.06.2016

Lindsay.sharman@wilmingtonplc.com