Businesses spend record £41bn to shore up pensions

UK employers made record payments into staff final salary pension schemes in the past year, according to the Office for National Statistics.

Total employer contributions into staff pension funds rose to £45bn in 2012 from £39bn in 2011. The overwhelming majority of this cash, £41bn, went into propping up lucrative final salary pension schemes, most of which are closed to new joiners.

The amount of money that UK business is paying into its staff pensions has trebled in the past decade, trying to make up a shortfall resulting from record low rates of interest and increased longevity. Mark Duke, at the pension experts Towers Watson, said: "Employers are paying more and more money into their final salary pensions schemes even though the number of employees still in them is getting smaller and smaller."

In February, the ONS revealed the proportion of private sector employees still in a final salary pension schemes had fallen from 26 per cent in 2002 to 8 per cent in 2012.

Mr Duke added: "Despite these huge payments, many companies are still finding that their pension deficits are not getting any smaller, partly because of today's very low interest rates… Employers and pension scheme trustees face challenging negotiations over what to do about this. More money spent shoring up pension benefits promised in the past can mean less money available for wages, dividends and investment in the business."