Two-thirds of Britainís FTSE 100 companies saw their pensions fund deficits worsen last year despite stock market rises and most are still failing to contribute enough to fill the shortfall.
A new report by RBC Capital Markets paints a grim picture of continuing pensions under-funding, calculating that FTSE 100 companies faced a collective pensions shortfall of £60 billion at the end of 2003.
This report, written by Jon Ralfe, the former Head of Corporate Finance at Boots, found that the shortfalls in the funds of two-thirds of the FTSE 100 actually got worse during the year, wihile the collective shortfall fell by just £6 billion.
This is despite the FTSE 100 index increasing by 13 per cent during 2003.
Moreover, although companies paid £11.6 billion into their schemes during the year Ė almost double the amount paid in 2002 - after paying £7.3 billion in pensions and £3.5 billion in interest on the shortfall, less than £1 billion was left to reduce the deficit.
"The overall reduction in the pension deficit from £66bn pre-tax to £60bn pre-tax was down to improving equity markets - which, so far, have not being repeated for 2004 - not to higher contributions," the report says.
Mr Ralfe also found that the majority of the increase in the overall level of contributions was down to a small number of firms making large payments, with five companies paying in £4.5 billion.
Two-thirds of firms still contributed too little to meet even one year of their pension obligations and to pay the interest on the shortfall in their fund, prompting Mr Ralfe to write: "Surely the days of whistling in the dark, hoping that the financial markets will plug pension deficits are gone?".
The only way firms could reduce their deficits was through large one-off contributions, he added, something that might prove financially impossible for some companies.
The findings cast real doubt on the argument that rising stock market can lift companies out of their pensions crisis and cast a further shadow over the future financial security of millions of people with apparently Ďsafeí final salary pensions.
Speaking to Channel 4 News Mr Ralfe said: "There are too many individual directors who are still keeping their fingers crossed hoping that the equity market will dig them out of a hole.
"Quite simply, our pensions funds, even in the FTSE 100, are having to run to stand still.Ē