Costain has reached an agreement with the trustee of its defined benefit (DB) pension scheme to remove a dividend parity arrangement and halt additional voluntary contributions (AVC).

In its FY25 Trading Update, the construction and engineering company announced it had completed the latest triennial review of the scheme with the trustee, which found the firm’s covenant and scheme surplus were in strong positions.

To reflect this, the company and trustee have agreed to remove the dividend parity arrangement that previously existed.

Under the dividend parity arrangement, shareholder distributions could result in matching cash contributions to the pension scheme.

Furthermore, the company announced that there will be no requirement for an annual assessment of the scheme’s funding position.

No further cash contributions will be required to be made by the company into the pension scheme under a new schedule, which will be in place until January 2031.

"It has been another positive year for Costain, with increased profitability, strong cash generation and further momentum in securing high-quality work across our chosen growth markets,” commented Costain chief executive officer, Alex Vaughan.

“The removal of the dividend parity arrangement and current intention to both significantly increase dividend payments and undertake a new £20m share buyback programme is supported by the strength of our balance sheet, substantial forward work position and confidence in our end markets."

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