Living longer a huge cost to UK businesses

The likelihood of people living longer cost UK companies an additional £20bn
in pension liabilities over 2005, a report by KPMG found.

Increasing longevity has already led some companies to amend or close their
defined benefit schemes, the firm said.

More companies could follow suit if a government white paper proposing that
compulsory pension contributions become a requirement is passed.

KPMG’s survey of over 200 companies of all sizes across the UK found that
companies are assuming that their staff will live for nearly one year longer on
average when compared to a year earlier, equalling to an estimated £20bn extra
in pension liability on top of a collective liability of around £500bn for all
quoted companies in the UK.

Alastair McLeish, head of KPMG’s pensions practice, said: ‘To really get a
handle on pension liabilities, more and better research is needed into the life
expectancy of pension scheme members.

‘It is also important that the life expectancy assumptions made by companies
are clearly communicated so that investors and analysts can properly understand
the basis on which a pension liability has been calculated,’ he said.

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