GLOBAL – A potential pandemic of avian influenza may have one upside – cutting pension plan liabilities, says consulting firm Mercer.

“For a typical funded pension plan, the overall effects might be a long-term reduction in liabilities after a short-term very difficult period,” Mercer said.

“Another short-term effect could be difficulty in staffing delivery of the administration and accounting of the flow of pension payments on which many in the population would rely,” the firm added in a report. Administrative systems would need to be “robust”.

The comments come in five-page briefing called ‘Preparing for a Pandemic: Avian Flu and your Pension Plans’ written by Marc Duguay.

“A sudden surge in death rates would have different impacts depending on the pension plan design and its financing method and the overall uncertainty will make it hard to model simple scenarios,” the piece added.

The International Monetary Fund yesterday said pension and insurance regulators would need to be on their guard if bird flu hit financial markets.

Mercer said one would hope plan sponsors have learnt the lessons from the financial market downturn at the start of the decade.

“However it is worth noting that markets are often driven as much by anticipation as reality.”

To prepare for the worst, organisations “should ensure they know their pension risks, understand them and take sensible actions to reduce and mitigate these risks”.