The National Association of Pension Funds has revealed that half of all UK employers offering pensions schemes increased contributions last year but the number of final salary schemes continues to fall.

David Willett, shadow work and pensions secretary, said: "This survey shows that the closure rate of the dwindling number of open final salary schemes in the private sector increased again during 2003. Yet the government, which has already cut the incentives to companies to run pension schemes, is planning to add to their burdens still further.

"Companies need better incentives to provide pensions for their employees. Without these we are heading for pension misery in years to come."

Steve Webb, work and pensions spokesman, said: "This is yet another sign of the failure of the government's pension policy.

"Final Salary Schemes were the gold standard of pension schemes instead of contributory schemes which employers tend to contribute less to.

"This dangerous trend is storing up a pensions time bomb for the future."

Forum Response: Institute of Directors

Derek Brownlee, pensions executive at the Institute of Directors, told ePolitix.com: "The trend isn't very surprising - indeed it would be a brave man who predicted that final salary schemes have a future in the private sector.

"The degree of risk which companies are exposing themselves to by offering a final salary pension is often much higher than they initially realised and this is forcing companies to address the issue of whether they can afford to continue with these schemes.

"Closing final salary schemes to new entrants will probably lead to an increase in costs over the short to medium term, but many companies see that as a price worth paying to control their pension costs better in the future.

"Too often when occupational pensions are discussed the focus is on private sector final salary schemes - but it's also important that the public sector wakes up to the huge exposure it is generating for the taxpayer through its own final salary schemes.

"And, as the NAPF survey hints, it's crucial that a way can be found to increase the level of pension saving for the many people who have defined contribution pension schemes."