Assets in defined contribution (DC) pension schemes will overtake the value of defined benefit (DB) assets before the end of this decade, according to new analysis.
Data from the Department for Work and Pensions (DWP), contained within the interim report from the Pensions Commission, shows that DC assets are forecast to grow from around £772bn in 2026 to approximately £1.24trn by 2035.
At the same time, DB assets are expected to decline from £1.17trn this year to around £524bn by 2035. The data indicates that DC assets will overtake DB sometime around 2030, before surpassing the trillion-pound mark in 2031.
However, the data also indicates that overall pension assets will fall from £1.94trn this year to £1.76trn in a decade’s time, reflecting lower contributions into DC pension schemes compared to DB.
Technology company Lumera, which highlighted the DWP’s data in a press release, said the projected decline in total assets demonstrated “the significance of the Pension Commission’s inquiry into adequacy”.
Maurice Titley, commercial director of data and dashboards at Lumera, said the data “highlights the scale of transformation that the DC market is currently undergoing and the challenge that lies ahead for providers”.
Employers spending more on DC…
Meanwhile, separate analysis by WTW has shown that the DC shift is already apparent on listed company balance sheets, with more money now going into DC schemes than to DB schemes.
The consultancy giant’s latest report on FTSE 350 companies’ pension spending analysed 79 companies with DB and DC funds with year-end reporting dates of 31 December.
Last year, almost three-quarters of these companies’ pension contributions went to DC schemes, WTW said. This amounted to around £7.5bn worth of contributions, against £2.8bn of total DB contributions. Total employer pension contributions have fallen by a third in the past three years, the analysis showed.
“The Pensions Commission’s interim report contained a clear message that ‘private pensions need to do more’.”
Bina Mistry, WTW
Bina Mistry, head of corporate consulting at WTW, explained: “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.
“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% on its 2022 level.”
… but further increases needed
However, Mistry added that, while overall pension spending has fallen, this may need to be reversed to help alleviate the adequacy issue.
“The Pensions Commission’s interim report contained a clear message that ‘private pensions need to do more’,” Mistry said, “though many large employers already go well beyond statutory minimum contributions.”
WTW also found that its sample of DB pension schemes had an aggregate surplus of £33bn, the fifth consecutive year of an overall surplus from this study. Almost two-thirds (63%) of companies reported that their schemes hold bulk annuities, up from 38% in 2018, with the proportion of assets represented by bulk annuities also rising from 9% to 33% in the same timeframe.
