The prospect of tighter pension regulation is sending companies scurrying to reduce a collective pension deficit which some experts think could cost as much as £150 billion to clear.
Some analysts fear that as firms pour money into pension funds, they will have little left over to invest in increasing profits and dividends in the longer term.
"Companies are making good their promises, which is the right thing to do," said James Fraser, head of LEK Consulting's financial services practice. "But the danger is that they're diverting money away from investing in the business, making it weaker... which of course is not in the best interests of the pension scheme."
The country's company pension "black hole" has been growing for some time as life expectancy rises and returns on some asset classes fall.
Many firms have already responded by closing to new members expensive "final salary" schemes, which guarantee a proportion of final salary as retirement income to workers.
But recent accounting changes have highlighted the situation is getting worse, and government steps to set up a new regulatory framework for pensions have created a fresh urgency among companies to deal with the problem.
Consultancy Deloitte said last month that under accounting rules codenamed FRS 17 the deficit for final salary pension schemes at the country's top-100 listed firms rose £10 billion last year to £75 billion, despite rising equity markets and higher contributions.
LEK Consulting believes the cost of clearing the deficit, based on more conservative assumptions on life expectancy, could be as much as £150 billion - about 10 per cent of the entire market capitalisation of the FTSE-100, or almost 90 per cent of the gross operating surplus, or profit, of private non-financial companies in the first nine months of last year.
Concerned about the risk of companies defaulting on pensions, the government has set up the Pension Protection Fund (PPF) which will impose a levy on companies.
The PPF has asked firms to give details on their pensions by the end of March this year to help it set a risk-adjusted levy.
The government has also created a Pension Regulator with potentially far-reaching powers to stop companies from returning cash to shareholders or making acquisitions and disposals if it considers pension benefits are at risk.
Mounting pension costs, tougher accounting rules and the arrival of the Pension Regulator have prompted firms to change their pension plans, in some cases shutting them down.
Last month pest control firm Rentokil Initial became the first FTSE 100 company to freeze its final salary pension scheme for existing members, while banking group HSBC Holdings injected one billion pounds into its scheme.
Others have rushed into government bonds to cover their liabilities, driving real yields on ultra-long dated, index-linked bonds to as low as 0.38 per cent this week - adding a further squeeze on funds whose value is in part based on the yield on bonds.
Some economists warn the dash to deal with pension deficits is damaging firms' ability to invest, noting that business investment grew just 0.3 per cent in the third quarter of 2005.
"The more pressing need for companies to address their pension fund deficits has no doubt been an important reason for weaker investment," George Buckley, chief UK economist at Deutsche Bank, wrote in a research note this week.
A decline in investment could dent company profits and, with less money available for dividend payouts and share buybacks, the recent rally in stock markets could start to stutter.
"The concern is there'll be less capital investment and fewer buybacks," said Stuart Fraser, a fund manager at Brewin Dolphin, though he thought individual companies with large deficits would suffer rather than the stock market as a whole.
British Airways said its pension deficit would rise to about two billion pounds under new accounting rules, more than 50 per cent of its market value.