For the first time DC pension contributions made by FTSE 350 companies have exceeded those paid into DB schemes.
Figures compiled by Barnett Waddingham show that £9.9bn was paid into DC schemes last year (until 31 May 2024) compared to £8.1bn paid into DB schemes. These DB payments include £4.7bn of deficit contributions and £3.4bn of DB pension accrual contributions.
Barnett Waddingham says this shift is a consequence of the increase in government bond yields over recent years which has improved FTSE 350 DB schemes funding positions, reducing the deficit contributions paid by scheme sponsors.
Barnett Waddingham principal Lewys Curteis says: “The contribution data signals a decisive moment in the pension industry. While DC has been the preferred form of pension benefit in the private sector for many years, it is only this year that DC contributions have exceeded DB contributions for the FTSE 350 DB scheme sponsors.
“This is the consequence of a large fall in DB contributions, reflecting the material improvement in funding positions and the reduction in the cost of DB pension accrual, rather than a step up in the level of DC contributions being paid.
“Concerns about DC pension adequacy remain, with the level of contributions generally considered to be too low to support good member outcomes. The reduction in DB pension costs and the emergence of DB scheme surpluses could provide companies with the means to redress this imbalance without materially impacting the bottom line.”