The Government announced yesterday that, following a consultation, employers should not be allowed to use the statutory override to alter their pension schemes in relation to members with protected person status.
Protected person status rules require companies which took over the running of previously state-run industries to provide pension benefits to workers employed at the time of privatisation that are no worse than those they received in the public sector.
The move comes as part of the Coalition's single tier state pension reforms in a bid to simplify the system.
But Joanne Segars, chief executive, of the NAPF, said the decision "could present a serious blow to the viability of defined benefit schemes".
She said: "The NAPF is disappointed by the Minister's decision. The reality is that this will affect far more than the 60,000 protected persons in defined benefit schemes suggested by the DWP.
"One of our members whose scheme will be affected has told us this will cost them millions of pounds per year.{desktop}{/desktop}{mobile}{/mobile}
"The Government has effectively left it to pension schemes, trustees and unions to negotiate how this will be resolved - as employers operating DB schemes with protected persons face the dilemma of whether or not they can, or should, treat their scheme members inequitably.
"These protected persons belong to the largest occupational pension schemes in the country and if these negotiations are not successful, then the cost of implementing the changes will be felt by other scheme members or even the consumer."
Pensions Minister Steve Webb said in a written statement: "We had to consider the best and fairest course of action in an area where the arguments are both finely balanced and highly polarised.
"The Government has decided that it should honour the promises that were made at the time of privatisation and which, in many cases, have been affirmed by Government Ministers subsequently.
"The Government thinks it is reasonable that issues arising from the end
of contracting out for this small number of workers should be resolved through
negotiation.
"Therefore the Government proposes that employers should not be allowed to use the statutory override to alter their pension schemes in relation to
members with protected person status."