Sugar is bad for your teeth and waistline. But less sugar — via a tax on the sweet stuff — also is bad for your pension fund.
A levy on sugary drinks — announced by the chancellor of the exchequer in his 2016 budget released March 16 — could add £3 billion ($4.3 billion) to U.K. pension liabilities, one actuary estimates.
“However, the number could double if we factor in the improvement in life expectancy due to a reduction in obesity,” said Phil Wadsworth, chief actuary at JLT Employee Benefits, in a note with the calculations.
The £3 billion jump is based on total pension fund liabilities of about £1.5 trillion, and the assumption that about 75% of liabilities are inflation-linked. Inflation is forecast to move above the Bank of England's 2% target in the second quarter of 2018 — when the effect of the soft drinks industry levy announced in this budget affects prices, said the Office for Budget Responsibility, in its key takeaways from the chancellor's announcement. The OBR expects “it to add around a quarter of a percentage point to (consumer price index) growth in 2018-"19,” noted JLT.
The new levy could push sugar to become the next “Big Tobacco,” said Elly Irving, ESG ESG analyst at Schroders PLC, in a news release. “If Big Food does become the next Big Tobacco, it could potentially result in lower sales growth, higher costs and large-scale litigation for food and beverage companies.”