30 May 2006
Research by KPMG has found that improving life expectancy cost
UK companies an additional £20bn in pension liabilities over
2005.
KPMG surveyed over 200 companies of all sizes across the UK as
at 31 December 2005. The survey found that companies are assuming
that their staff will live for nearly one year longer on average
when compared to a year earlier. This extra year equates to an
estimated £20bn extra in pension liability on top of a
collective liability of around £500bn for all quoted
companies in the UK.
The survey also revealed some other key features of companies'
assumptions on life expectancy:
Companies are being hit by the uncertainty over future mortality
rates. Companies surveyed are assuming that the next generation of
retirees will live nearly one year longer on average than the
present generation of pensioners. This means that around
£10bn has already been set aside by UK quoted companies to
cover the uncertainty of future improvements in life
expectancy.
Growing life expectancy is a particular issue for companies
within the financial services sector. These companies assume that
their current and future pensioners live around one year longer
than companies in other sectors. This extra year equates to nearly
£5bn extra in pension liability on top of a collective
liability of around £125bn for all quoted financial services
companies in the UK.
