Pension costs are on the increase

The CBI estimates firms will have to double their pension contributions to about �43bn during the next four years.

However, this figure represents a drop in the ocean when compared to the estimated �160bn total shortfall in UK pensions.

Ultimately, the CBI concludes that the strains of having to keep pension schemes afloat will damage UK growth and hit government finances as a result .

Missing out

Despite a recent stock market recovery the prospects for UK company pension schemes looks set to worsen.

The CBI estimates UK firms will have to pay �8bn extra into their pension schemes in 2003, rising to �12bn and �16bn during 2004 and 2005 respectively.

If firms fail to pay in the extra cash it could mean their employee pension schemes may not have enough money to pay promised benefits.

The growing UK pension crisis is forcing many firms to close their schemes to new members.

Last week, a survey from Mercer Human Resources estimated that the number of firms offering lucrative final salary pension schemes to new employees had fallen from two-thirds to two-fifths in the last year.

Ian McCafferty, CBI chief economic adviser, warned that the current crisis was hitting firms hard.

"The magnitude of the pensions deficit has become a serious concern.

"The economy will suffer, with the effects rebounding on the Government through lower tax receipts."