The CBI has written to the regulator and Pensions Minister Steve Webb, saying it believes DB scheme deficits are restricting business growth and investment across the UK, and threatening workers' pension benefit rights.
The CBI, which represents 240,000 businesses, has long campaigned for a new objective for the Pensions Regulator to ensure an employer's need for growth is considered during scheme funding negotiations, and is properly reflected in trustees' dealings with the employer.
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The objective is currently under consultation with a view to implementation this year.
In the CBI's recent pensions survey, 70% of employers said DB deficit funding costs were having an impact on business investment and 46% of companies stated funding requirements are affecting their ability to borrow.
The CBI has called for a new statutory objective, which would help ensure employers are able to balance the need to invest and grow their business with the need to fund their pension schemes.
A strong employer is more likely to pay members' benefits in full than an employer who, through burdensome regulation, cannot expand their business, the CBI said.
The CBI and Trade Union Congress said in a joint letter to the regulator that they agree that its approach does not go far enough, and both organisations are concerned an opportunity is being missed.
Neil Carberry, CBI director for employment and skills, said: "The statutory objective was designed to ensure that trustees and businesses could foster strong companies and healthy pension schemes.
"We are concerned that this intent is not sufficiently reflected in the draft Code of Practice because the regulator is trying to force schemes to artificially reduce risks in a way that will divert necessary cash away from business investment.
"The regulator must ensure its approach allows employers and trustees to balance investment for growth with the need to fund schemes and reduce risk."