Bid to tackle pensions deficits "could stifle recovery"

Major companies pumped a record 17.5 billion into pension schemes last year, helping to cut the FTSE 100's total pension deficit by almost half to 51 billion, according to the Accounting for Pensions report from actuaries LCP.

The huge increase in contributions comes as trustees call for more funds to address deficits following the financial crisis - which LCP said could hinder the fightback from recession for many businesses as well as hitting investors.

Partner Bob Scott said the record level of payments was "reassuring for scheme members" but added: "Such increases in contributions reduce the scope for companies to pay dividends and to invest in their businesses."

Mr Scott also warned that the push towards cheaper schemes as lucrative final salary pensions are closed and scaled back ignored the social consequences of leaving large numbers of people without sufficient retirement savings.

He said private sector pension policy was now "driven almost exclusively" by financial considerations.

"Put simply, it is unlikely that the benefits emerging from the defined contribution schemes that have been set up to replace defined benefit schemes in recent years will deliver adequate benefits," he added.

The report showed oil giant Royal Dutch Shell was the biggest contributor - adding 3.3 billion to its scheme - while Lloyds Banking Group, Royal Bank of Scotland and consumer goods firm Unilever all paid in more than 1 billion.

Eight firms in the FTSE 100 paid more into their pension schemes than they did in dividends to shareholders, LCP added.

Increasing numbers of companies including Marks & Spencer and Sainsbury's are now using property transactions as an alternative to cash to help meet the demands of pension trustees, it said.