Companies in the UK's FTSE 350 have seen their pension spending ‘conclusively’ shift away from defined benefit (DB) to defined contribution (DC) schemes, with DC now dominating firms’ outlay on pensions, a report from WTW has found.

Its FTSE 350 DB Pension Scheme Report 2026 showed that the UK’s largest listed companies with DB schemes on their balance sheet at the end of 2025 had more than £300bn of DB pension liabilities.

In 2025, these companies paid £7.5bn in DC pension contributions, compared to £2.8bn of DB scheme contributions.

This meant that the proportion of these companies’ pension spending going to DC schemes had risen from 40 per cent in 2022 to 73 per cent in 2025.

Overall, employers’ spending on pension contributions had fallen by a third over the three-year period.

The aggregate DB funding position for companies with a 31 December year-end was a surplus of £33bn, the fifth surplus year in a row.

Seven in 10 (70 per cent) companies reported that their pension scheme assets exceeded liabilities on an IAS19 basis.

The aggregate pension scheme funding level increased marginally in 2025, up from 110 per cent to 111 per cent.

Almost two thirds (63 per cent) of companies disclosed that their schemes held bulk annuities and/or longevity swaps, up from 38 per cent in 2018, while the median proportion of assets these policies represented rose from 9 per cent to 33 per cent over the same period.

“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,” commented WTW head of corporate consulting, Bina Mistry.

“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 per cent on its 2022 level.

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

“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.”

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

“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.

“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.”

This article was first published on our sister title, Pensions Age.

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