FTSE350 defined benefit (DB) pension scheme sponsors could unlock £45bn of economic value via surplus refunds, analysis from Barnet Waddingham has revealed.

As of 30 November 2024, Barnett Waddingham’s DB End Gauge index showed that the average time to buyout for FTSE350 DB schemes was 5.1 years.

The estimated aggregate surplus on a low dependency basis was £60bn. According to the firm, if refunded in full, this would result in around £45bn in tax payments to the FTSE350 companies and £15bn in tax payments to HMRC.

The aggregate surplus was estimated to have increased over the last six months, from £45bn on 31 May 2024 to £60bn on 30 November 2024, primarily due to strong asset returns and lower expectations for future inflation.

Healthy DB pension scheme funding levels are expected to continue in 2025, with average UK pension risk transfer (PRT) market volumes expected to reach £45bn per annum, according to Legal & General.

However, an analysis from The Pension Regulator (TPR) said the DB and hybrid pensions landscape continued to shrink at a yearly rate of 3 per cent in 2024.

Barnett Waddingham principal, Lewys Curteis, commented on the findings: “As we approach the end of the calendar year, the UK’s DB pension schemes remain in a robust financial position.

"Disappointingly, the much-anticipated response to the “Options for Defined Benefit schemes” consultation has not yet emerged, and private sector DB pension reforms were omitted entirely from the recent Mansion House speech.

"Our analysis illustrates the significant opportunity that currently presides in the UK DB pensions market – unlocking the value in these schemes would provide a welcome boost for companies, the government and the wider economy.”

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