The UK's biggest companies have pension deficits totalling £37 billion, despite firms paying record amounts into the schemes.
The shortfall faced by FTSE 100 companies with final salary pension schemes in July 2005 is £5 billion less than it was 12 months earlier as a result of the continued recovery in equity markets, according to actuarial consultants Lane Clark & Peacock (LCP).
But the firm warned that the FTSE 100 would have to rise from its current level of around 5,300 to more than 6,700 if the deficit was to be completely wiped out.
The group said six firms faced pension scheme funding shortfalls that were more than 30 per cent of their market capitalisation.
Overall only three FTSE 100 companies with final salary pension schemes had funds that were in surplus under the accounting standard FRS17.
Companies paid a record £10.5 billion into their pension schemes during 2004, with BT and the Royal Bank of Scotland each contributing more than £1 billion.
Overall three-quarters of companies increased the amount they contributed to their schemes during 2004.
But the current deficit faced by all FTSE 100 firms would still take eight years to be wiped out if current contribution levels were maintained.
The group warned that new pension fund regulations could have a significant impact on companies with deficits.
New funding requirements that come into force in September will give trustees greater powers to negotiate with companies to increase contributions.
At the same time regulations included in the Pensions Act could restrict the amount of dividends paid by companies with deficits, or make it difficult for them to merge with another company or be bought.
LCP added that during 2004 nearly half of FTSE 100 companies declared shareholder dividends that were worth more than their pension fund deficits, with all top flight firms declaring dividends worth £39 billion, £2 billion more than the £37 billion pension funding shortfall they collectively face.
Chris Tavener, partner at LCP, said: "Despite record amounts of contributions by the FTSE 100 companies and recovering equity markets, FRS17 pension deficits remain frustratingly high.
"New funding regulations will mean pressure for higher contributions will continue, which could lead to increasing conflict between trustees and the sponsoring company.
"Companies will need to balance the needs of their pension scheme members with the expectations of shareholders."