Advisers could be on the hook for millions of pounds in uninsured losses if they fail to act on the imminent A-day deadline, according to a specialist group risk intermediary.
Should any group life scheme suffer a death in service without amending its trustee rules to reflect the HMRC changes on 6 April it could result in advisers being held liable, John Kerr warned.
Kerr, director of Kerr Henderson Financial Services, told COVER he fears the lack of awareness and action to address the removal of the notional cap on death in service benefits could backfire on scheme advisers if they fail to warn clients.
"All advisers should be contacting their clients to look at this," he said.
"We've been through our client bank to try to identify which schemes are pre A-day and which are not.
"The funny thing is, whose professional indemnity policy will it bounce off? Will it be a trustee indemnity or an adviser indemnity?
"We're certainly looking at it and trying to get our clients to review it quite seriously at the moment."
The cap was removed in April 2006 as part of an HMRC clean-up of tax rules in the area, with the industry given five years to adapt.
However, until recently there has been little activity in the sector, with a report from group risk trade body Grid revealing that more than 80% of companies with group life schemes were either unsure what to do, or plan to do nothing.
"Pretty much nobody has done anything about it," Kerr, who is also a member of Grid, said.
"But what's interesting is talking to the different insurers. Each of them has a slightly different approach and it's been quite confusing.
"A lot of people have been saying that if a scheme wants to keep a notional cap they don't need to do anything, whereas I've spoken to others who say that's not necessarily true, that it depends what's written in the trustee rules".
Kerr urged advisers to contact their clients to ensure they are aware of the changes and the consequences of trustees not checking the rules.
"Everybody should be getting these rules scrutinised, but in this age of austerity they'll not want to spend money on legal review.
"I think there probably will be some tragedy that comes along, although I think people are waking up to it slowly now because there's a lot more activity from insurers about this."
