It is understood several private equity bosses including Simon Walker, new chief executive of the British Private Equity and Venture Capital Association (BVCA), will tell trustees at a conference in Edinburgh on Wednesday that it is in their interests to invest more heavily in the industry.

They are expected to persuade trustees at the National Association of Pension Funds conference that the high returns achieved by firms such as KKR and Guy Hand's Terra Firma, which bought the music label EMI for £2.4bn last May, will help them to significantly boost the funds they oversee.

But the move is likely to reignite the wrath of trade unions such as the GMB, which have linked the takeover of companies by private equity groups to the collapse of employee occupational schemes.

Unions warn that although pension funds on the whole stand to benefit, individuals could lose their retirement savings if private equity activity is encouraged.

Referring to one particular buy-out last summer, Paul Maloney, senior organiser of the GMB, said: "The people that benefited were a handful of pension funds while 5,500 people lost their jobs and their pensions. All they (pension funds] are doing is investing in the demise of the economy and of prosperity. Not all private equity is bad and we cannot give independent advice to trustees but my advice to them is to know exactly what they are investing in, what the management fees are going to be like, the percentage returns to private equity and will it be some of their own people thrown out of jobs?"

The GMB union has calculated that private equity activity has so far led to the collapse of 96 pension funds.

A spokesman for Unite said: "Pension fund trustees will invest wherever they can achieve the best returns for their fund members, within reasonable ethical parameters. However, even ignoring the net negative impact which private equity firms can represent for those workplaces they target, it is worth noting that private equity is far from being the best investment opportunity available to pension funds. Indeed, research for Unite found that the empirical evidence from a number of studies suggests that investors in private equity funds do worse than if they invested in the stock market."

Private equity firms are understood to be scrabbling around for new sources of funding this year after many of the major banks withdrew from underwriting deals after the start of the credit crunch.

According to the latest estimates, banks are collectively still trying to sell on $200bn (£101bn) of leveraged buy-out debt used to fund deals in 2007, and are not predicted to return to the market for another 18-24 months. As a result, some private equity firms are believed to looking at pension funds as an alternative source.

But some believe the move could turn up the heat on the private equity industry, which last year came under attack from MPs and unions over its work practices and tax contributions.

Northern Rock removed the spotlight from the sector during the closing months of 2007, but unions have already started to increase their activity in this area once again. The TUC, Unite and the GMB are currently gathering support for a Private Members' Bill proposing that private equity firms are forced to tell employees about their plans for the companies they take over.

The Transfer of Equity (Protection of Employment) Bill, which will receive its second hearing at Westminster this week, has been proposed by Labour MP John Heppell.