Skip to main content
main content, press tab to continue
Survey Report

FTSE 350 DB pension scheme report 2022

By Edd Collins and Charles Rodgers | May 25, 2022

Defined benefit pension schemes and their impact on company accounts at 31 December 2021.
Pension Board and Trustee Consulting|Pensions Corporate Consulting|Pensions Risk Solutions|Pensions Technology

Welcome to the eleventh WTW report discussing the impact of defined benefit (DB) pension schemes on FTSE 350 company accounts.

Unlock More

Executive Summary

Accounting positions – Improved accounting positions

  • 94% of companies have improved their accounting position - An improvement in funding positions was seen widely across the FTSE 350 in 2021, and the percentage of companies reporting a surplus on an accounting basis increased from 38% to 62%.
  • From £5bn deficit at end of 2020 to £32bn surplus at end of 2021 - The end of 2021 saw the highest accounting surplus in the last decade. This surplus continued to grow in the first half of 2022, almost doubling in the first five months of 2022.

Assumptions – Increases in discount rates and inflation, small reduction in life expectancy

  • +51bps increase in discount rates - Discount rate assumptions have fallen sharply over the last three years, In 2021 we saw a reversal of this trend and average discount rate assumptions rose from 1.37% p.a. to 1.88% p.a.
  • +45bps move in RPI - The end of 2021 saw a sharp upward movement in short- and medium-term inflation expectations and this was reflected in accounting assumptions
  • Life expectancy assumptions at lowest in a decade - Life expectancies disclosed for scheme members peaked in 2014 and have trended steadily downwards since that time, reaching a decade low. However, there does not seem to be any material pandemic effect yet.

Key trends – DB closure and de-risking continues, dividends return

  • 35% of companies reported DB plans open to future accrual - 2021 saw DB closure activity continue, but we may be now be reaching a point where closure slows, with many employers not seeing the current environment as a time to make changes.
  • £43bn of de-risking transactions in 2021 - After consecutive record years for the bulk annuity and longevity hedging market, levels of activity in 2021 dipped slightly but still remained the third highest on record.
  • 81% of companies paid more in dividends than deficit contributions - With many pandemic-driven dividend cuts reversed, but little change in deficit reduction contributions (DRCs) in 2021, the number of companies paying more in dividends than DRCs increased drastically over the year (from 57% in 2020).

The start of 2021 was overshadowed by the ongoing impact of COVID-19 and, with it, renewed economic uncertainty. However, the next few months saw a steady flow of positive news on the vaccine rollout, which led to improvements in asset markets that boosted funding positions. Throughout the remainder of 2021, the more positive outlook continued and by the end of 2021 accounting positions were displaying a strength not seen for over a decade, with an aggregate surplus of £32bn.

As a result, the percentage of FTSE 350 companies reporting a surplus on an accounting basis increased from 38% 2020 to 62% in 2021 and 94% had improved their accounting position over the year.

With surpluses now more common than deficits (on an accounting basis), the focus of many companies is likely to shift towards other liability measures, such as cash funding or buyout, as schemes continue to progress towards their long-term objectives.

Title File Type File Size
FTSE 350 DB pension scheme report 2022 PDF 1.2 MB

Senior Director, Retirement
email Email

Senior Director, Retirement
email Email

Contact us