The black hole in the UK's largest company pension schemes shrank by £5bn during the past year, a report says.
Employers have been paying more money into schemes
The combined pension fund deficit of the FTSE 100 companies fell from £42bn to £37bn in the year to July, actuary firm Lane, Clark and Peacock said.
Increased contributions from employers and improved stock market performance were the key reasons for the reduction.
But, if current trends continue, the black hole will not be closed until 2013, the group warns.
'Better than expected'
"It is a long haul for firms to close this pension gap," Martin Slack, senior partner at Lane, Clark and Peacock told BBC News.
"On the plus side, firms are making larger contributions and investment performance is better than expected."
"However, scheme members are living longer and interest rates are low, which means that more money will be needed to close the deficit."
LARGE PENSION DEFICIT FIRMS*
Royal & SunAlliance
*Source: Lane, Clark and Peacock
Mr Slack added that it could take eight years for the combined £37bn pension gap to be closed.
But some firms may take even longer to make good their scheme deficits.
Mr Slack said that some firms had seen their deficits grow over the past year and that unless they upped their level of contributions he could see such schemes being in deficit for "tens of years."
Firms identified by the Lane, Clark and Peacock as having the largest pension deficits include; BAE Systems, British Airways, BT, ICI, Royal & SunAlliance and Rolls Royce.
Over the past 12 months companies collectively paid a record £10.5bn into their employee pension schemes, the actuary firm said.
In order to reduce the drain on profits, many firms have been replacing final salary schemes - which guarantee an income in retirement based on length of service - with money purchase schemes.
Under money purchase arrangements, firms only guarantee how much they will pay into a worker's pension and not how much the pension will be worth on retirement.
Nevertheless, the actuary firm found that only three firms in the FTSE 100 do not have a pension scheme deficit - Associated British Foods, Johnson Matthey and Old Mutual.
Have you been affected by a deficit in your employer's pension scheme? Have you been frozen out of your final salary pension? Are you making provisions for the future? If so, are you worried about a shortfall?
This debate is now closed. Thank you for your comments.
The financial products industry has led the way in poor investment for our savings, pensions and mortgages. Plus their main aim is satisfying the needs of directors and shareholders, not the investors.
Phil, Hook, Hants
As an independent financial adviser specialising in the pension field I can understand fully the frustrations that people feel when trying to plan for retirement. It is true to say that means testing has created major problem for anyone looking to improve their lot in retirement. Add to that the complexity of legislation added to employers, not to mention the costs, and the picture quickly becomes clear that the current situation needs serious overhaul. Personally I think that pensions should be removed for good from the political agenda. That way individuals, employers and advisers can start to talk in straight terms without having to add caveats about 'possible changes in future legislation'. Pensions are a long term issue lasting for most of 40 years and need careful consideration. Political tinkering has led to most of the problems we have today.
Greg Heath, Preston, Lancashire
Terrible mixed messages: must save for the future, but means-tested so lose the incentive and confidence is low in current products. Where is the reward for not spending all my money today? Where is the penalty if I chose to squander my savings instead of being mature about my future? All I see is more taxes on pension funds, less returns than trend, and selfish people who spend all their money being bailed out by more and more taxes on my income. Desperate situation.
Barry Hahn, London, England
I am aged 55 and consider I am lucky as my company still has its final salary pension scheme, although it's been closed to new entrants for some years now. My concern is whether the scheme will still be there when I have to retire at age 60? It's much too late for me to make other arrangements now so it's a bit of a worry.
Russ, Dursley, UK
We are trying to save. My wife and I have private and company pensions, long term ISA's, and we are looking to downsize property when we retire. But Gordon Brown loves means testing, so where are the incentives to save? We don't earn vast salaries and feel we may be worse off than those on state pensions come retirement age, whatever that will be. Especially if we have to pay increased taxes to fund civil servants and MPs retiring at 60. I won't be voting for Brown after the pensions fiasco.
Neil, Chertsey, UK
Thousands of ex-pat state pensioners have their pension frozen because we choose to live in Australia. If I had emigrated to the USA, and many non-Commonwealth countries I would receive full annual increments.
W Houghton, Salamander Bay, Australia
As a 21-year-old embarking on his adult life it is incredibly worrying seeing the pensions that my generation's parents have been paying into falling into trouble. It makes me wonder if they are even worthwhile in the end. I think our grandparents had the right idea; scrimp, save and stash it away in a mattress.