Legal and General has reported half of group income protection queries have been about retirement age implications for benefits.
According to Linda Baker, market and product development director at L&G, most larger corporates and brokers were fully aware of the impacts and taking action.
But added there was a widespread lack of awareness among the smaller broker and SME communities.
Baker said: "With the removal of the default retirement age employers could effectively be left paying benefits indefinitely.
"What is interesting is that the bigger players are quite at home with this and have been tweaking benefits packages in line with 2018 retirement age.
"But there is still a big chunk that do not think they have to worry because the new retirement age does not come in until 2018."
She warned that for Group IP 2018 was a moving target and benefits must be reviewed now.
"If somebody went off sick now the employer would pick up the liability to retirement age and beyond. A lot of people have not changed it," Baker said.
"The smaller brokers and SME market tend to be more unaware of the implications. There is this misguided perception of not needing to worry about it."
The government is phasing out the default retirement age from 6 April 2011. It means employers cannot make employees retire at 65 unless they give notice by the 5 April 2011.
Age therefore can no longer be used by employers to define different levels of benefits and would have a direct impact on group IP.
But successful lobbying by the group risk industry has resulted in exemption for insured group risk benefits.
The exemption means benefits only have to be offered to the state pension age which is increasing over a staggered period; to 66 between 2018 and 2020; and gradually to 68 by 2046.
