UK roundup: Towers Watson on Hutton, Asda closes scheme
UK - Towers Watson has estimated a £80bn (€91bn) drop in public pension liabilities if suggestions made by Lord Hutton are implemented.
Lord Hutton's report on public sector pensions, published last week, focused on an "inherently unfair" final salary link, but also cautioned against the use of emotive language in the pensions debate.
He argued that while the term 'gold-plated' was often used in the debate, the average benefit for public sector workers was £7,800 a year.
However, Towers Watson estimated changes suggested by the former minister for Work and Pensions could lead to significant savings for the government, with a £10bn reduction in liabilities being achieved if all workers could be convinced to retire one year later than the current average.
The consultancy also noted that although certain schemes - such as the ones covering employees of the National Health Service - would still allow members to retire on a full pension at 60, this would not be the case for future employees.
John Ball, head of UK pensions at Towers Watson, suggested this might already cause current scheme members to retire later.
Ball further speculated the review would result in pensions being calculated based on length of employment, disregarding the final salary link where possible.
"In that case, above-inflation salary growth after the current pay freeze would no longer increase the value of pensions earned to date - this could save serious money," he said.
"It would also encounter serious opposition, but, if you read the report carefully, it is not ruled out.
"It all depends on how Lord Hutton and the government define accrued rights."
While the consultancy acknowledged that breaking the final salary link completely was unlikely, it said that, if it did happen, it would reduce pension liabilities by an additional £70bn for all current employees.
Ball added: "The gap between public sector and private sector pensions is wide enough to mean the public sector can make significant savings while still offering better pensions than are generally available elsewhere."
Meanwhile, the UK supermarket Asda, owned by US company Wal-Mart, has closed its final salary pension scheme.
The move was said to be the result of the scheme deficit increasing from £210m to £400m in just nine months.
The closure will affect 3,800 workers, who will be offered membership in the company's defined contribution scheme.