UK firms are struggling with the cost of providing their workers with pensions, a survey from Mercer Human Resources has suggested. 

On average, it costs firms the equivalent of nearly a fifth of workers' salaries to offer a final salary pension scheme. 

Costs can rise to more than 40% of salary in some cases, Mercer added. 

Employers group, the CBI, said high pension costs were damaging investment and jobs. 

Profits hit 

Three-quarters of firms offering final salary pensions said scheme costs were having a "significant" impact on profitability, Mercer said. 

In 2004, the same survey suggested that about half of firms offering final salary pensions were seeing profits squeezed. 

"The added burden of spiralling pension contributions is threatening UK firms' ability to invest in future jobs and growth," John Cridland, deputy director general of the CBI, said. 

"The government must take heed of the extra burden on companies of these massive contributions and deliver on its promises in May's Pensions White Paper to simplify rules and reduce regulatory burdens," he added. 

Nevertheless, the vast majority of firms surveyed said they were committed to their staff reaching retirement with adequate pension provision. 

But in order to keep pension promises in place many workers will have to make higher contributions. 

The survey found that 60% of companies planned to increase members' contributions during the coming year. 

One in five companies said they were considering closing their scheme to existing members as well. 

Age discrimination 

Meanwhile, a report from pension advisers Hewitt Associates said that some company pension schemes could fall foul of age discrimination legislation, due to come into force in October. 

Four out of ten company pension schemes pay contributions based on age and length of service. 

Under such schemes, older workers tend to enjoy higher employer pension contributions than younger staff. 

This has the potential to be considered discriminatory against younger workers, Hewitt Associates said. 

However, firms may get away with paying more into older workers schemes if they argue that by doing so they are trying to produce a more equal result in terms of the level of pension available at retirement, the group added.