This ‘unprecedented’ situation is likely to worsen according to accountants KPMG, and within five years £4 out of every £5 spent on defined benefit pensions will go to covering past liabilities, and is thought likely to mean more defined benefit schemes face closure.

KPMG calculates that the proportion of companies that cannot pay off their deficit in any realistic timeframe from discretionary cash flow has increased to 22%, the highest level in three years.

But if the money FTSE 100 companies dish out on dividend payments and capital expenditure were added to this figure, over 94% of them could pay their pension deficits in one year.

KPMG says pension schemes are competing for resources that may be needed to ensure a continued supply dividends, capital investment and debt reduction.

But few firms are showing signs of making such significant cutbacks to fund staff pensions. A recent report from Lane Clark & Peacock warned that many blue chips are paying insufficient attention to their pension risks; only 17 set out a policy in their report and accounts for dealing with pension risk. This compares with other financial risks such as currency risk, which all FTSE companies provide full disclosure for.

Mike Smedley, pensions partner at KPMG in the UK said: ‘Unless companies and their pension scheme trustees can work together to ensure that pension funding can be managed in a way that does not impact on companies’ wider financial flexibility, this is likely to result in more and more companies opting to close defined benefit schemes altogether.’