Police are under pressure to launch an investigation into the Royal Bank of Scotland's £12bn rights issue after a complaint by a member of the Scottish parliament.

The Lothian and Borders force confirmed yesterday it was conducting inquiries into whether the bank fraudulently sought investment from shareholders, many of them UK pension funds, knowing that the bank was insolvent.

Much of the focus of the investigation is expected to centre on the former boss Sir Fred Goodwin and his team of executives, who masterminded the bank's debt-fuelled rise to become the world's fifth largest bank before its fall from grace.

At the time of the rights issue, Goodwin and his team assured investors the bank was solvent and able to chart its way through the credit crunch.

Scottish National Party MSP Christine Grahame has asked the police to investigate whether shareholders were misled.

Her call comes days after the bank - which has its headquarters in Edinburgh - revealed it was on course for the biggest loss in UK corporate history as it expected to write down as much as £28bn from the falling value of its assets. The bank, almost 70% of which is now owned by the state, has seen its market value plunge from £75bn two years ago to about £4.7bn.

Grahame argued that the true state of the bank's finances should have been disclosed at the time of the rights issue last April. "If you are misleading people into thinking this is a stable investment ... it's a criminal offence," she said.

Grahame has also written to Scotland's top law officer, the lord advocate, Elish Angiolini, with her allegation. An RBS spokesman declined to comment.

Alex Salmond, the first minister, said: "I'd favour a parliamentary investigation, not just into the Royal Bank of Scotland - as it is only one of hundreds of banks worldwide which has got into serious trouble - but into the financial sector."

The government's beleaguered pensions lifeboat scheme could see its funding shortfall double to more than £1bn after the collapse of the Canadian telecoms firm Nortel earlier this month.

Already forced to rescue the schemes of collapsed companies such as Woolworths and Lehman Brothers, the Pension Protection Fund (PPF) has been asked to step in to pay the retirement incomes of Nortel's 43,000 British pensioners after the parent company went under with huge debts.

Figures revealed that the Nortel scheme's accounting deficit of £250m ballooned to more than £500m once the company had collapsed. The PPF's last accounts revealed a shortfall of £500m, making a total of £1bn.

The Nortel rescue came as Moody's, the ratings agency, warned that pension deficits posed a significant risk to UK corporations following a dive in share prices over the past year and a rise in the cost of funding pensions. The agency said that pension shortfalls were the equivalent of debts and were an additional burden when many companies had come under pressure from banks to cut their debt.

According to the latest government figures, employers offering guaranteed retirement schemes have suffered a shortfall of £195bn in recent months. Opposition MPs and employers' groups have lobbied ministers in recent weeks to provide support for company pension schemes before they became unaffordable. The CBI called on ministers last week to relax strict rules and allow firms more leeway to fill pension deficits.

The National Association of Pension Funds, which represents occupational schemes with about £700bn under management, said about 25 of Britain's largest firms were planning to close their schemes entirely after a rise in the cost of providing guaranteed pensions.

The pensions expert John Ralfe said the PPF would need to do more than "paper over the cracks", as it was facing a potentially ruinous 2009. He said ministers needed to make clear how they intended to fund the PPF's increasing deficit if employers refused to pay higher fees.

The PPF has already amassed billions of pounds of pension liabilities less than four years after it was created. The organisation's funding comes from levies charged against healthy pension schemes. However, the fees have failed to plug a growing shortfall, which according to the fund's last accounts had reached £500m.

Ralfe said the collapse of Nortel UK, which is a main sponsor of the 2012 London Olympics, would strain the PPF's finances. The cap on benefits applied by the PPF would, he said, reduce the burden to £900m, while cash inside Nortel UK and its Canadian parent that is earmarked for pensions could reduce the deficit by another £400m. However, a £500m deficit would still make it the largest occupational fund to be rescued by the PPF and would double its existing £500m deficit.

A spokesman for the PPF said that its staff would initially assess the eligibility of the fund. Once it is accepted, which is almost certain, the pension scheme would usually become part of the PPF within two years. The scheme pays 90% of accrued benefits to deferred members and employees, and 100% to existing pensioners, with a cap of £28,000.

He said: "We were expecting a rise in the number of schemes applying to the fund. The looming recession meant it was obvious that would happen and we have heavily modelled how that will affect the fund. We are comfortable with the situation."

He said the fund was under less pressure than many people imagined because the scheme members are not yet retired. "We don't have to pay pensions in one hit, but over decades as people retire."

Moody's Investors Service warned that occupational pensions funds faced a tough year. Its report, Pension Deficits: Back on the Agenda, said Britain's top 20 companies ranked by pension plan assets had pension obligations totalling approximately £230bn in 2007.

Tesco has lobbied the government to push through reforms to the UK's retirement rules that would allow the supermarket to cut its final salary pension payouts if employees live longer than expected.

Documents obtained under freedom of information rules reveal that the company told ministers that employers should be allowed more flexibility in administering their schemes in the light of rising retirement costs.

The documents show for the first time that one of Britain's major employers is concerned that the rising costs of defined-benefit pensions will become an increasing burden under current rules. The revelation is expected to dismay unions at the supermarket, which is one of a dwindling band of employers offering guaranteed retirement benefits. Tesco emphasised that it remained committed to its scheme, and was asking government for more flexibility to help keep costs under control.

Several companies have renegotiated their pension arrangements with unions to reduce costs or cut retirement benefits. However, they are forbidden from reducing some benefits, including the indexation of income payments. A guarantee that payments rise in line with inflation is increasing costs significantly, according to employers.

A series of reports have highlighted the parlous state of most occupational pension schemes. A funding shortfall of £195bn has opened up in recent years for the 8,000 employers still operating the gold-plated defined-benefit schemes, according to the government.

A new survey from the National Association of Pension Funds – the trade body for company retirement plans – says one in four of Britain's biggest employers intends to shut their final salary schemes to existing employees over the next few years.

Three out of four plans which promise pensions based on final salary and length of service are already shut to new employees.

Which companies will close their schemes?

No one knows. The NAPF survey is anonymous but covers most big firms. Companies such as BT and BA are known to have looked at closure as a way of putting a cap on the huge shortfalls built up over the past years (and made worse by the current financial crisis). Some retailers are also seriously considering closing their schemes.

Who will be affected?

Anyone who is still working and contributing to a final salary (also known as defined benefit) scheme when a company closes its retirement plan.

What will happen to them?

The most likely pattern is for members to move to a money purchase, or defined contribution, scheme. With this, you no longer receive a pension based on salary and time in the scheme. Instead, your payout is based on investment performance and the annuity (guaranteed income for life) rate you receive on the day you retire.

What does this mean for contributions?

With defined contribution, a typical firm pays in around 10% of its salary costs into a pension plan – against about 25% into a final salary scheme. Employees could find less of their pay packet goes into pension contributions than under a final salary scheme – but they will almost certainly (there is no guarantee in any of this) end up with lower pensions.

Can you protest against closure?

According to pensions consultants Towers Perrin, firms that close their schemes must allow members a 60-day consultancy period. In one recent case, a strike threat forced the company to retreat and re-instate the old scheme. It may also be possible to negotiate higher payments from the company into your new money purchase plan – especially for older employees. This could sweeten the switch.

What about my contractual rights?

Employment contracts rarely offer a particular form of pension as a legal right. Instead, they will say you will receive a pension without defining its type or its size. But lawyers Sacker and Partners, a pensions law specialist, says: "While in most cases scheme closure is possible, there are legal hurdles to be jumped. Some pension schemes' rules prevent closure to existing employees – so employers should check first whether this can be achieved at all. But where it can, employers will need to consult with affected employees for at least 60 days and give proper consideration to employees' views. They will also need to get the "buy-in" of the pension scheme's trustees to a proposed closure, who would expect to see the employer demonstrating a good business case for going down this road.

What if I have already retired?

A scheme closure does not affect those already drawing a pension – they should continue to receive their money every month. But it could affect any discretionary annual increases or "perks" from the plan. Anyone who has left the company concerned before retirement and has a frozen or "preserved" pension should also escape any change. "Past benefits are respected" says Jonquil Lowe, author of Finance Your Retirement. )

Are there any rays of light?

Not really unless investment markets make a very sharp recovery and continue to outperform. Employers say it could end problems at work where two people of the same age doing the same work could now have different remuneration if one is the pension plan and the other, who joined recently, is not because the scheme is already barred to new staff.

When will closure happen?

Again, no one knows. The NAPF survey talks about the "next few years" but some will move over the next few months.

Norwich Union owner Aviva sparked protests from investors yesterday after it put a freeze on withdrawals from its biggest property fund amid concerns that the second wave of the credit crunch will severely damage Britain's insurance industry.

Aviva said it would block investors from cashing in their holdings for six months to allow more time for it to generate cash through a sale of shops and offices across the country.

The decision, which affects up to 225,000 investors in the Norwich Union Unit-Linked Property Fund (Life and Pensions), follows a dramatic fall in commercial property values over the past year. In December alone the main index tracking values for the industry lost 5.6%, the biggest monthly drop on record.

In most major cities hundreds of shops lie empty as growing numbers of retail businesses hand back their leases and file for bankruptcy. A glut of office space, especially in London, has also become ready for occupation just as the recession bites. Property analysts report that falling sale prices are now being followed by falling rental values, as tenants begin to wield power over commercial property landlords.

Earlier this week Land Securities, Britain's largest property trust, said it had been five months since it had attracted a new tenant to one of its buildings and that it was expecting a long and painful recession. It warned that rents were likely to fall for the rest of the year and it would need to sell buildings to shore up its balance sheet, adding to the glut of shops and offices with "for sale" signs in their windows.

Property consultant Jones Lang LaSalle said it expected falls of up to 12% in values this year, after a 27% drop in 2008.

Aviva has already stopped withdrawals at two other property funds: its European Property Fund, which only opened last year, and an institutional fund, the Investors Pensions Property Fund, suspended in 2006. The insurer's flagship retail fund, the Aviva Investors Property Trust, continued to trade normally, the company said, despite falling in value by almost half to £1.8bn.

Norwich Union marketing director David Barral said suspending the unit-linked fund was necessary because the firm needed time to raise cash to satisfy exit demands. He said: "This action is in the best interests of investors by protecting the long-term value of their investment and avoiding having to sell properties below their market value."

The fund, which is only open to Norwich Union life and pensions customers, has declined in value from £5bn at the end of 2007 to £2.9bn in December 2008.

Thousands of investors who were encouraged to switch cash into the fund in the last couple of years can expect to have registered significant losses. Average values have fallen by more than a third since their peak in 2007. Gloomy economic data in recent weeks has spurred an increase in the number of people looking to crystallise their losses and switch to other assets.

Analysts Keefe, Bruyette & Woods argued that UK insurers due to report 2008 figures next month would declare "scary balance sheets". It forecast a drop in sales of 10% at some firms this year and a fall of 4% across the industry next year.

It said the focus of investor interest would be on balance sheets and whether insurers would experience the same problems faced by banks. Analyst Greig Paterson said he expected Aviva and Prudential to disclose "robust capital positions and intact dividends in March".

But he signalled that Legal & General, Standard Life and other insurers heavily dependent on the UK for sales would suffer. "We are wary of companies that are heavily focused on their UK domestic franchise, where we see relatively bad news in 2009."

My property fund is suspended - what should I do?

For the time being there is not much you can do. There are commercial property funds across the insurance industry which are locked up, preventing investors from accessing their cash. They are frozen because insurers cannot sell properties held by their funds quickly enough, and at a decent price, to satisfy the number of people wanting to exit the funds.

Should I get out as soon as I can?

Arguably insurers that freeze their funds are doing investors a favour. A firesale of properties would only depress prices further and damage investors' interests. Also, many of those who have invested in commercial property funds are inexperienced individuals who have relied on advice from a friend, relative or commission-hungry sales person before jumping on a bandwagon in the months before the crash. Though they are sitting on heavy losses, they should probably take a longer-term view and maintain their investment for a few years to benefit from the recovery.

How long will I need to wait?

That is impossible to answer. Most analysts believe an upturn is at least two years away given the glut of office buildings that dominated city-centre skylines. But that is a guess. The recession could be harsher than expected and UK commercial property one of the last assets to recover.

Where else can I invest?

Stockmarkets, which represent a broader slice of the economy, are expected to pick up first. Massive spending in the US by the Obama administration should put the US at the forefront of any recovery and that is likely to spur US stockmarkets to rise faster and further than most. However, investing in the stockmarket is risky. If gambling with life savings is not the preferred option, there is always the steady return from National Savings.

A quarter of Britain's biggest employers expect to close their final salary pension schemes to existing members in the next few years, according to a major report yesterday. The move will cut the retirement benefits of hundreds of thousands of workers and is expected to spark disputes with unions as companies switch staff into cheaper pension arrangements.

The rising cost of providing guaranteed pensions has already resulted in the closure of thousands of schemes to new members. Now firms want to go a step further and close their schemes to all new contributions, according to a report by the National Association of Pension Funds.

The research found that 25 of 100 firms that responded expected to close final salary schemes to existing members.

Respondents were anonymous, but it is expected that several well known retailers, which have been hard hit in the recession, are considering closing schemes. BT and British Airways have shortfalls in their schemes that, if they were filled, would wipe out their profits for several years.

The most recent official figures showed that just 2,240 (26%) of the 8,490 private sector final salary schemes were open to new members. Some firms have renegotiated the terms to make their schemes less expensive to run, but the threat of strike action has usually deterred employers from closing the arrangements.

Pest control firm Rentokil closed its final salary scheme down entirely in 2006, but this has only been followed by a handful of firms. Last April chemical maker Ineos told the 1,200 workers at its Grangemouth plant that they would no longer pay into a final salary scheme. The company was confronted with a strike and within weeks had backed down.

Pressure is on employers to cut pension costs from investors concerned at the impact on profits and dividends. The life expectancy of workers, especially men, has risen significantly in recent years. Combined with low interest rates and a sharp decline in investment return, pension schemes have struggled to meet their commitments. In the last year most pension funds have seen their funds decline in value by more than a quarter.

Government figures show that an overall surplus on the funds held by the top 100 firms of more than £50bn has reversed to become a deficit of more than £190bn.

• Investors thought money was in safe haven
• No case for compensation, says company

Nearly 100,000 Standard Life investors have been told that a cash fund which many regarded as an ultra-safe alternative to the stockmarket was in reality invested in toxic mortgage debt that has plummeted in value.

The £2.4bn Standard Life Pension Sterling fund was the company's sole offering to pension investors who wanted to shelter their savings from market turmoil. But the company is writing to the fund's 97,000 investors warning them their average £19,100 deposit will be cut to £18,200 as a result of losses on mortgage-backed securities held in the fund.

The news will dismay many investors who thought they were protected from stockmarket falls. Many were close to retirement and had parked their pension savings into the cash fund before turning it into an annuity.

Savers at other pension companies will also be shocked to discover that what they thought were deposit-style funds have fallen in value. Worst hit is Threadneedle's £450m money market fund, which has fallen 16.6% over the past year.

Threadneedle blames the unprecedented fall on the fund's holdings of floating rate notes (FRNs) which have fallen in value, with many unable to be converted into cash.

Prudential's Cash Haven fund has fallen by 0.3% over the year. It too was invested in FRNs.

Standard Life's Pension Sterling fund was 44% invested in asset-backed securities, considered at the time of purchase to be a triple-A rated alternative to cash. Only 12% is in cash itself.

The fund's biggest single investment is Lanark Master Issuer, a £3bn pool of Clydesdale and Yorkshire Bank mortgages, including buy-to-let loans. Its second-largest holding is Brunel RMS, a pool of "non-conforming" mortgages understood to be 28% "self-cert" and 44% buy-to-let loans, rated Aaa at issue.

A Standard Life spokesman said: "We have been very clear that the fund was not just invested in deposits but also in floating rate notes and asset-backed securities.

"We have had problems valuing the mortgage-backed securities in the fund. It came to light at the end of December that we couldn't put a value on them. We put that right on 14 January , which led to the fall in the fund's value."

He said that Standard Life may be forced to make further cuts to the fund's value if market turmoil persists. "It is impossible to predict with certainty when markets will improve and there may be a possibility of further deterioration."

Standard Life said it does not believe there is a case for compensation. But it promised to reimburse some savers who put in money between 23 December 2008 and 13 January 2009.

Financial advisers said they were outraged at the cut in values. Tom McPhail, pension specialist at Hargreaves Lansdown, said: "A lot of money market funds have tried to earn that little bit extra by pushing the boat out into asset-backed securities. But they just got the balance wrong. It is inexcusable.

"It's true that Standard Life did not say it was guaranteed. But on the other hand, they were marketing it as a secure, safe- haven fund for savers who were worried about equity markets."

Standard Life has since opened a new cash fund for investors nervous about markets. The Managed Cash Fund is designed to produce lower levels of volatility and investment returns, before charges, that are closely aligned to deposit rates.

Pension risks

Cash funds are used as safe haven vehicles, usually by pension savers. Many "park" their pension savings in a cash fund just before retirement. There are two types - deposit-style funds, which are virtually risk free, and funds which try to enhance returns using floating rate notes and asset-backed securities. Until now, that strategy worked, but while there is no market in such securities, it's difficult to put a value on such funds. Few workers in company pension schemes will know if their "cash" option is risky. They can check on websites such as trustnet.co.uk for performance figures. Better still, trustees of company schemes should ensure their cash option is safe.

Yes, I know, I know. Pensions are boring. And confusing. And a little bit scary. Most people find the whole business of planning for retirement about as enticing as a bowl of cold porridge, with a stale mince pie for afters.

But with the current state pension a mere £90.70 for a single person, it is time to give the matter a little serious thought. After all, you may feel hard up now, but eating baked beans for supper each night while worrying about the gas bill is not going to be any more enjoyable when you're 78.

Whether you already save into a scheme or not, you should find out if your employer offers a pension. If it does, join it. "Many people work for a private company and don't join their employers' pension scheme," says Malcolm McLean, chief executive of the Pensions Advisory Service. This, says McLean, is "effectively turning away wages". You wouldn't turn away a £1,500 pay rise, but if you earn £30,000 and are not taking advantage of an employer's offer to contribute 5% of your salary to a pension, you are missing out on a similar sum.

The first step is to ask your line manager if a scheme exists. If it does, they will be able to tell you if you are entitled to join. Some companies make employees wait before they can join a scheme; others let you sign up on day one. There are two types of occupational scheme - final salary schemes, also known as defined benefit schemes, and defined contribution schemes.

Unfortunately, opportunities to join final-salary schemes are about as common as sightings of Amy Winehouse sober, because they are increasingly expensive to run. This is because they offer a guaranteed payout linked to your earnings at the time you leave the company, and as people live longer the cost of providing these guaranteed payments gets bigger. If an employer is offering to let you join such a scheme, you should probably bite its hand off.

More usually you will be offered a defined contribution pension, where an employer tells you how much it will pay in each month, but the amount you get out will depend on the performance of the funds in which your cash is invested. This may not be quite so attractive, but there is still the prospect of free money on the table, from both your employer and the government. "An occupational pension scheme offers government tax relief," points out McLean. "That's not appreciated by a lot of people. Putting away £1,000 only costs £600 if you're a higher-rate taxpayer."

Of course your employer may not have a scheme, or you may not be entitled to join it. But if you are one of at least five employees it is obliged to tell you about stakeholder pensions. These are a type of personal pension which your employer does not have to pay into.

McLean offers a "rough and ready" way to work out how much you will need to pay in to build up a decent pension: halve your age when you start paying into a pension, he says, turn that figure into a percentage and keep contributions at that rate until you retire.

To stop people simply not bothering with pension planning (and thereby guaranteeing themselves a pretty impoverished retirement) the government is introducing the new Personal Accounts pension scheme in 2012. Enrolment will be automatic and apply to earnings between roughly £5,000 and £33,000.

"If you work for an employer who doesn't provide a pension, you'll be enrolled on a government scheme and have to contribute 4% of your earnings, matched by 3% from your employer and 1% from government," explains McLean.

But it's probably not wise to relax and wait for 2012. According to McLean's "rough and ready" calculation, 8% of your income will only provide for a comfortable retirement if you start saving when you're sweet 16.

The UK's biggest employers' group warned yesterday that companies could face intense pressure to switch funds into final salary pension schemes just when they need cash reserves to get through the credit crunch.

The CBI said it feared pension fund trustees, regulators and the government could over-react to growing pension deficits with demands to close shortfalls created by the economic downturn. It is concerned this would weaken firms' finances at a time when banks are refusing to extend credit to many businesses.

The CBI pointed to government figures showing that although in June last year defined benefit pension schemes were £53.4bn in surplus, tumbling share prices means final salary schemes now have a collective deficit of £194.5bn.

Investors, who are keen to protect dividends, argue that companies cannot afford to pay off the deficits. The CBI is anxious they will sell their holdings in firms that are told to make top-up payments.

The CBI said: "Those deficits are beginning to play on investors' minds, and we fear that they will not allow for the longer term, secure nature of this pensions funding, and will mark those firms down."

A vote of no-confidence in firms with large pension fund deficits could hit several of Britain's top 100 companies, including British Airways and BT, and drag down the FTSE 100 when it is already more than 30% lower than a year ago.

The pension regulator has indicated it will examine fund deficits on a case-by-case basis. It is not expected to tell firms to increase their funding. However, some pension consultants believe many firms will ask for dispensation to cut their support for pensions, which could trigger a row with the regulator. The CBI is also concerned that pension trustees could ask firms to reduce their deficits.

Central to the CBI's argument is that pension deficits are artificially high following an unusual drop in share prices.

However, accounting rules insist that companies show a snapshot of their pension fund losses in their annual accounts. In recent years these have shown dramatic falls and encouraged many companies to close their schemes to new employees or close them down altogether. The majority of schemes invest most of their funds in various stockmarkets and have suffered huge losses.

John Cridland, CBI deputy director general, said: "An over-reaction to deficits could be a factor in sending some firms under, and leave the rest struggling for capital at a time when they need it most. We urge investors and trustees not to feed the fire.

"Instead they should step back from these spot valuations, and recognise that the deficits are a snapshot indication that does not reflect the full picture."

Cridland said he wanted investors to take a longer-term approach "which recognises that the underlying funding position of pension schemes is strong, and that deficits will be made up over time".