DC surpasses DB for first time ever, says BW's 2024 FTSE 350 report

As part of our annual analysis of the FTSE 350 companies with DB pension schemes, we can reveal that in a historic shift, contributions paid by the FTSE 350 DB scheme sponsors into defined contribution (DC) schemes exceeded those paid into DB schemes for the first time ever.

Our report covers the twelve month period leading up to 31 May 2024, and the data reveals that contributions totalling £8.1 billion were paid into DB schemes (consisting of £4.7bn of deficit contributions and £3.4bn of DB pension accrual contributions) while £9.9 billion was paid into DC schemes. 

This historic shift is a consequence of the increase in Government bond yields over recent years, which has improved FTSE 350 DB schemes funding positions (and therefore reduced the deficit contributions paid by scheme sponsors) and reduced the cost of DB benefit accrual.

Principal and Corporate Actuary Lewys Curteis said: “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.

"To be clear, 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."