The Government must begin to simplify complex taxation rules and legislation around pensions or face more firms abandoning occupational schemes.
That is the message from a major new pensions survey of 559 engineering employers.
It shows the majority of employers want to continue offering pension schemes but financial and legislative pressures are forcing closures.
David Yeandle, deputy director of the Engineering Employers Federation said declining stock market returns, minimum funding requirement and introduction of FRS17 have put huge pressure on final salary schemes.
He warned that pension rules were too complex and called on the Government to address the whole issue of pensions in its forthcoming Green Paper.
"The Government should be making pensions more understandable and attractive. This is a long-term problem and we need to get a consensus on the future of pensions.
"The key message is that engineering firms are still interested in providing schemes for staff, but are suffering financial problems that makes it difficult."
The survey shows more than 200 companies have closed final salary schemes to new staff - the majority in the last three years.
A further 54 firms have closed final salary schemes to existing staff and there was also a considerable acceleration since 1999.
By Ross Wigham
Main findings of the EEF survey
- Defined benefit or final salary schemes are still the most common provision, but money purchase schemes have increased since 1998
- The rate at which employers are closing pension schemes or reducing benefits has accelerated rapidly in the last three years
- The main reason for offering a pension was 'employee welfare'
- Minimum Funding Requirement and rising costs are main reason for closing final salary schemes
- Nearly three-quarters said all employees should make a compulsory minimum contribution of between 4 and 6 per cent