UK – Aon Consulting says higher life expectancy may have added up to 10 billion pounds to top companies’ pension fund liabilities.

Aon said continued improvements in life expectancy may have added as much as 10 billion pounds to the pension liabilities of companies in the benchmark FTSE 100 index over the past three years.

It cited recent figures from the Government Actuaries Department showing a 10% rise in the life expectancy of a man aged 65 since its 2001 forecast.

It used this – and the FRS17 accounting rule, to predict that for every year of increased life expectancy, pension costs would rise by around 3.5%. It said this could mean 100 million pounds in extra liabilities for each FTSE 100 member.

"We calculate that if the life expectancy figures which FTSE 100 companies use to calculate their pension provision are underestimated by just one year, this is likely to understate liabilities on balance sheets by £10bn,” said Aon principal Paul McGlone.

"Advances in science and medicine have had a very positive affect on the number of people surviving into old age and companies now need to ensure that they factor in ongoing longevity changes into their company pension provisions.

He added: "For many individuals it is more realistic for the planning of retirement to focus not on a specific retirement age but on working long enough to accumulate the means of obtaining the required level of retirement income.

“Low levels of pension investment in youth and middle age, coupled with three successive years of falling equities means that many people approaching retirement age will be disappointed with their impending level of income. The solution for the majority of the UK population will be to work beyond the common retirement age of 65."

Meanwhile the opposition Conservative party has slammed the timing of the Office of National Statistics’ release of a paper into the possible effects of double counting of pension contributions on gross domestic product calculations.

The ONS said there was “considerable uncertainty” about the pension contributions data in its surveys. “Any change to contributions to funded occupational pension schemes in MQ5 surveys will feed into estimates for compensation of employees, a component of GDP,” it said.

Conservative pension spokesman David Willetts said: “It is disgraceful that this admission should be smuggled out without a press release on the day after the Hutton enquiry.”