The Government could be forced to rescue occupational pension schemes with "large scale injections" of tax payers cash according to a report commissioned for the National Association of Pension Funds.
The report "The impact of deflation on pensions and pension funds" by economist Roger Bootle warns of the potential impact on occupational schemes if the economy enters a deflationary period.
Bootle says the onset of deflation combined with poor economic performance may lead to large numbers of employers being unable to meet their pension scheme obligations.
He adds: "In this event, reductions in benefits, increased employee contributions or large scale injections of government money into pension funds would be required to prevent pension fund insolvency."
NAPF chairman Alan Pickering plays down the potential role of government, he says: "This is an independent report commissioned by us and published by Bootle. We are generally happy with his conclusions though they are his and not ours. We are happy enough to publish it as an NAPF report but every nuance is up to him to justify and debate not us."
Pickering believes the main emphasis of the report is to focus its members on the future, warning them not to sit on their laurels. He says: "Everything about occupational schemes is hypothecated towards inflation being the problem. But our members need to review their strategies in the event of a deflationary environment."
He believes government does have a role but only in "adult and open discussions" over what is a joint problem for both employers and the state. He says: "We need to have a dialogue about future deflation and about overcoming it we are not asking for a handout."