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Defined contribution dominates FTSE 350 pension spending, WTW finds

Its report showed that by the end of 2025, almost three quarters of pension contributions went to DC plans (£7.5bn), with only £2.8bn for DB. 

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Defined contribution dominates FTSE 350 pension spending, WTW finds
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FTSE 350 companies’ pension spending has moved towards defined contribution (DC) schemes, leaving defined benefit (DB) schemes behind, according to WTW.

Its report showed that by the end of 2025, almost three quarters of pension contributions went to DC plans (£7.5bn), with only £2.8bn for DB. 

The aggregate funding position for DB schemes showed a surplus for the fifth year in a row. 

70% of companies disclosed assets in their pension schemes exceeded liabilities under the IAS19 accounting standard, with a total surplus of £36bn. 

Funding levels increased from 110% to 111% over the year. 

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For the first time since 2013, life expectancies reported in accounts went up for both men and women. 

Nearly two-thirds of companies now have bulk annuities or longevity swaps in their pension schemes, up from 38% in 2018. 

These policies now represent a median of 33% of assets, compared to 9% in 2018. 

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The proportion of schemes open to accrual barely fell in 2025, dropping from 24% to 23%, which is less than half the level seen in 2017.

Bina Mistry, head of corporate consulting at WTW, said: “Although most schemes had closed even to existing members by 2017, cash injections to clear deficits meant that DB plans continued to consume the bulk of pension spending until 2022. 

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“After that, higher bond yields both improved funding positions and made the little DB accrual that remained cheaper to provide. Spending on DB pensions in 2025 was down more than 70% on its 2022 level.

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“With most DB plans well-funded and well-hedged, the days of companies having to make large cash injections ought to be behind us.”

Mistry added: “However, some of the fall in overall pension spending may have to be reversed in response to concerns that employees saving through DC plans are typically not on course for adequate retirement incomes. 

“The Pensions Commission’s interim report contained a clear message that ‘private pensions need to do more’ – though many employers already go well beyond statutory minimum contributions.”

Charles Rodgers, head of UK pension accounting at WTW, said: “Deficit contributions have slowed to a trickle, dropping below £1 billion in 2025. 

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“The amount of surplus refunded to companies will soon be the number to look out for.

“Improved funding positions have helped more schemes insure more of their liabilities, but some now intend to run on for longer and use surpluses to benefit sponsors and scheme members.”

Rodgers added: “Nonetheless, pension obligations are large enough that even small changes to assumptions can make a meaningful difference to the numbers reported to investors. 

“Disclosed life expectancies have recently ticked up after being on a downward trend for a decade; they should rise again in 2026 accounts, particularly for schemes with older memberships.”

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