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Pension liabilities increase will cause cost rise
25 February 2008
The increase in the pension liabilities will "undoubtedly" see costs rise according to The Pensions Advisory Service (TPAS).
Last week, the pensions regulator published a statement setting out a new approach to mortality assumptions and asserted that people on pensions were living longer and that this added to the cost of pensions.
Des Hamilton, technical director for TPAS, acknowledged that there was "realism" behind the proposals, though he said that the effect would be the end of defined benefit schemes.
He said: "This is seen by some as another nail in the coffin for defined benefit schemes but all that's happening here is the regulator is telling trustees to have a more realistic approach to this issue of what sort of account assumption they make in terms of valuing their pension schemes."
He added: "I think its realism, but it will undoubtedly have the effect of increasing cost. However, the cost is there – the cost will be the cost. It's about how you calculate that cost."
