Defined benefit (DB) pension schemes are no longer acting as a "drain" on sponsoring employers, Broadstone has said, after its analysis found that deficit reduction contributions dropped to £932m in Q3 2024 as funding improvements eased financial pressures.

Broadstone highlighted data from the Office for National Statistics (ONS), which showed that £932m of private sector and hybrid DB pension scheme deficit reduction contributions were made in Q3 2024.

The firm noted that whilst this marked a small increase compared to the £828m paid out in Q2 2024, it is still "substantially" lower than the historical average, with deficit reduction contributions totalling £3.1bn five years prior in Q3 2019, rising to as high as £6.2bn in Q4 2020 during the height of the pandemic.

Broadstone head of policy, David Brooks, highlighted the data as demonstration of the diminishing burden that DB pension schemes had on their sponsoring employers.

“The good news story of improved funding for pension schemes has predominantly been focused on the potential for either greater security via risk transfer or improved member benefits via discretionary increases," he stated.

"However, these headlines have missed the extra bonus of DB schemes ceasing to be a drain on employers running these arrangements."

In particular, Brooks argued that more should be made of the ability of employers to reallocate their resources without the same strain of billions of pounds each year being diverted into DB pension schemes via deficit reduction contributions.

"This finance can now be invested back in their own business - possibly driving wage increases, supporting economic growth or research and development among other beneficial uses of capital," he explained

“This should be good news for pensions in general which can tend to attract doom and gloom headlines given high-profile catastrophes, bad behaviour and poor performance.

"The truth is that member benefits in DB schemes have never been more secure and trustees have never had more options for protecting pension benefits.”

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