Almost a quarter of FTSE 100 companies still providing DB pensions despite cost concerns

Around a quarter (24 per cent) of FTSE 100 companies still provide defined benefit (DB) pensions to at least some of their staff, despite industry predictions of the imminent closing of all private sector DB schemes, research from Isio has revealed.

However, the survey also found that less than half of the 24 schemes with active members have a significant level of continuing pension build up, with the rest available only to a relative handful of employees.

Furthermore, only 10 per cent of the FTSE 100 are still providing DB in a "meaningful way", while just one company, Croda International, remains open for new joiners.

Indeed, the research found that whilst some DB schemes remain, half of FTSE 100 DB schemes have closed fully over the last decade, with 10 closures over the last two years alone.

Isio suggested that this was likely done in an effort to reduce risk and costs, as most DB pension schemes cost well in excess of 20 per cent of salaries, with Isio benefit change lead, Scott Kendrick, noting that companies are facing "increasingly significant pay claims" in the current high inflation environment.

He continued: "Against this backdrop, some will seek to make savings on their pensions spend, and at the same time address the pensions gap between DB and DC populations.

“However, we are also aware of companies putting pension change on the backburner to avoid potentially disrupting a post-pandemic recovery and tight labour market.

“Several of the remaining schemes have introduced significant reductions in the amount of salary that is eligible for continuing DB pension build up."

In particular, the research found that nine FTSE 100 companies introduced a cap on pensionable salary increases to limit the rate at which DB pensions can grow, providing cost savings for the company.

However, Kendrick said that this can make it less likely that the schemes will be closed fully in future, as there would be a "significant financial cost" to the sponsoring employer of doing so, with these schemes instead expected to be ‘run-off’ over many years.

“Royal Mail’s intention to open the UK’s first collective defined contribution (CDC) scheme heralds a new era in benefit design innovation, although we expect only a handful of employers to follow them in setting up their own CDC schemes," he added.

“However, in the race for talent and to promote effective workforce management, many companies will be forced to review their long-term savings strategies and explore CDC mastertrusts, decumulation vehicles and better member engagement tools as alternatives.”

    Share Story:

Recent Stories


Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

ESG & DC – creating the right tools
In the latest of our series of Pensions Age video interviews Francesca Fabrizi, Editor in Chief of Pensions Age is joined by Manuela Sperandeo, Head of Sustainable Indexing EMEA, BlackRock and Mark Guirey, Executive Director, Asset Owner and Consultant Coverage - MSCI to discuss some key trends of ESG investing among UK pension funds today. Please click here for an edited write-up of the video

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Global sustainable credit
Laura Blows speaks to Royal London Asset Management senior fund manager, Rachid Semaoune, about global sustainable credit
Global equities and transition investing
Pensions Age editor, Laura Blows speaks to Royal London Asset Management equity investment director, Jonathan Price, about transitioning to sustainable investments within global equities

Advertisement Advertisement Advertisement