Hewitt Associates said in its research that the ban will substantially increase people’s life expectancy and therefore their pension costs, according to a news report on the Business.telegraph Web site.
Figures compiled by Hewitt show an average improvement of just one year in life expectancy will increase the average deficit of the FTSE 100’s pension funds by £15 billion to £20 billion, the news report said. The increase in annual pension costs could reduce profit before tax for the FTSE 100 companies by around £1 billion a year.
The law bans smoking in the workplace in England by 2007, including all pubs, clubs and restaurants, and is expected to encourage around 600,000 of the UK’s 13 million smokers to quit.
Kevin Wesbroom, a Hewitt Associates pensions consultant, said, “The numbers do highlight just how sensitive profit and loss charges, deficits and hence cash funding requirements are to assumptions made about future morality rates. Companies and Trustees that are responsible for defined benefit schemes need to recognize that this announcement is likely to affect the company’s financial statements as well as how their schemes are funded.”