FTSE350 company accounts put another spotlight on pension surpluses

LONDON, July 17, 2025 – Analysis of FTSE350 companies’ accounts underlines how defined benefit (DB) pension schemes no longer require large cash injections. Instead, many employers and scheme members are potentially able to benefit from significant surpluses.

WTW analysed the reports and accounts of FTSE350 defined benefit scheme sponsors with 31 December 2024 year-ends. Findings include:

• The aggregate funding level was 109%, with 64% of companies recording a surplus. Aggregate assets exceeded liabilities by around £30bn, similar to the previous year’s £29bn.
• WTW estimates that around half of the companies in this analysis could also have surpluses on a more prudent “low dependency” basis that is used in the new scheme funding regime. The Government says it is “minded” to permit trustees to make payments to an employer where schemes would remain fully funded against their “low dependency” liabilities.
• In 2024, DB sponsors paid twice as much into defined contribution (DC) schemes as they paid into DB schemes. 2023 had been the first time that DC contributions exceeded DB contributions for DB sponsors.
• Overall pension spending has fallen by around 30% over two years. The rise in DC contributions – driven by higher membership and wages – has not matched the fall in DB costs as deficit contributions have shrunk (£1.6bn in 2024 compared with £6.6bn in 2022) and as higher interest rates have reduced the cost of new accrual.
• Assumed male life expectancy at 65 continued to fall (from 86.7 in 2023 to 86.5 in 2024) and was 18 months lower in 2024 than in 2014. Female life expectancy rose year-on-year from 88.5 to 88.7). However, the gap between male and female life expectancy should narrow again soon: 2025 accounts are likely to use a different projection model which should increase life expectancy at retirement, especially for men.

Bina Mistry, head of corporate pension consulting at WTW, said: “The days of DB schemes being a major call on company resources look to be behind us. Deficit contributions have dried up to a comparative trickle, risks have been hedged, and attention is shifting to the healthy surpluses that many schemes now enjoy.

“For some employers, the priority will be to use stronger funding positions to get liabilities off their balance sheets as soon as they can, but others are considering the opportunities for both members and sponsors to benefit from running the scheme on for longer.

“Policy changes should make it easier for surpluses to be shared between employer and scheme members, but these are not expected to be in force for more than two years. In the meantime, companies can explore using surplus in other ways, such as to meet pension costs (either in respect of DB accrual or DC contributions for those in the same trust) for current employees or to cover scheme expenses, as some are already doing. The Pensions Regulator has told trustees to think about how they would respond to proposals from the employer for releasing surplus funds and has suggested that sitting on a material surplus for a long time with no plan to use it may indicate poor governance.

“Where an employer wants to sever its link to a pension scheme that cannot afford to buy annuities for all its members, the proposed legislative regime for commercial superfunds could offer a faster exit route that also improves the likelihood of members receiving full benefits.

“Companies’ spending on DC contributions rose by 10% year-on-year, but this will generally have been driven by pay growth and more employees being in DC schemes rather than by increased contribution rates. The review of pension adequacy that the Government is expected to launch imminently may ultimately lead to higher contributions in some workplaces but it is likely to be many years before anything is implemented. Many large employers already pay much more into employees’ DC schemes than the minimum amounts required by law. Where this is not the case, employers and individuals will have to take the initiative themselves if contributions are to rise before then.”

Notes to editors

For further details of accounting disclosures, see WTW’s FTSE350 DB pension scheme report.

Amongst FTSE350 companies, 148 have defined benefit pension schemes and 82 of these have 31 December year ends. WTW’s analysis is based on these 82 companies, which recorded combined DB liabilities of £316bn.

In line with international accounting standards, company accounts disclose liabilities based on a best-estimate of future cashflows, discounted using high-quality corporate bond yields. This approach produces lower liabilities than the “low dependency” basis that the Government proposes should be the statutory floor above which trustees may agree to make payments to an employer. The Pensions Regulator estimates that 75% of schemes were in surplus on its approximation of a low dependency basis, as at 30 September 2024.

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