Company pension funds are increasingly sinking below the minimum level required because of falling long-bond yields and equity markets, a partner in the international investment consultancy company Watson Wyatt has claimed.

Writing in Perspectives, Watson Wyatt's new publication in Ireland, Mr Derek Hunter warned that there was an increasing likelihood of companies being asked to pre-pay pension contributions in order to maintain minimum funding levels.

However, in an article that argued the importance of balancing risks with possible opportunities he said: " the combination of even a modest market rally with upward pressure on bond yields could alleviate some of the pressure.

"Indeed, companies may at some stage get back to a situation where there is considerable flexibility with regard to the cashflow aspects of pension funding."

Earlier this year, Watson Wyatt published a study showing the world's pot of retirement money shrank by some $1,400 billion (€1,180 billion) last year as a result of the three-year bear market.

Mr Hunter argues in his article that the solutions for managing funds in the future should not be "overly dominated by the very recent past".

"In managing the finances it is always important to bear in mind the connection between salary increases and defined pension costs. If we are entering a phase of low real salary escalation, this should have very real beneficial impacts on pension funding costs," he said.

For those with defined-contribution arrangements, Mr Hunter warns that there may be increasing concerns on the longer-term exposure of such arrangements.

"It is a fact that the average contribution rates being paid into these arrangements will only be sufficient to provide very modest levels of benefits at retirement. As yet, however, very few employees have retired under these arrangements the question remains as to whether employers may face additional costs when significant numbers reach retirement age," he wrote.