Government VAT decision will cost DB schemes £3bn

It also calculated a similar amount could be added to the liabilities of the main unfunded public sector schemes - with annual costs increased by around £200m a year. The consultancy believes DB pensioners in both the private and the public sector will gain but this will be at the expense of their former employers. Watson Wyatt explained pension costs would rise because returning the standard rate of VAT to 17.5pc in 2010 would lead to higher inflation and therefore higher pension payments for retirees in subsequent years. Watson Wyatt head of defined benefit consulting John Ball says: ...