Fears for future as pensions become smaller

Blue-chip companies put a record 17.5bn into pension schemes last year, helping to cut the FTSE 100's total pension deficit by almost half, to 51bn, said the Accounting for Pensions report published this week by 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 fight back from recession 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 said the push towards cheaper schemes as final salary pensions were closed or 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 Royal Dutch Shell was the biggest contributor – adding 3.3bn to its scheme – while Lloyds Banking Group, Royal Bank of Scotland and consumer goods firm Unilever all paid in more than 1bn.

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 are now using property transactions as an alternative to cash to help meet the demands of pension trustees, it said.