DB pension liabilities could soar by £3bn as a result of inflation caused by the Chancellor’s sugar tax, and could rise even higher if longevity improves as a result says JLT Employee Benefits.
The consultancy says the Office for Budget Responsibility’s prediction that the sugar tax will add around a quarter of a percentage point to CPI growth in 2018-19 translates to a £3bn increase in the £1.5trillion in total pension liabilities. The calculation assumes around 75 per cent of liabilities are linked to inflation.
JLT Employee Benefits chief actuary Phil Wadsworth says: “Pension liabilities could jump by £3bn as a result of the sugar tax as it will increase inflation. However, the number could double if we factor in the improvement in life expectancy due to a reduction in obesity.
“This means that pension schemes and their sponsors will suffer collateral damage from the sugar tax.”