The majority of small firms in the UK are still unaware of the new stakeholder pension arrangements coming into force in April.

Findings from the Prudential show a high degree of confusion and ignorance relating to the Government-backed scheme.

It found 31 per cent of small and medium businesses were risking a fine of up to £50,000 by not offering staff access to a pension scheme.

About 63 per cent are unaware the stakeholder initiative starts in less than three months.

Sean Tompkins, marketing director of Prudential Financial Services, said: "There is currently a great deal of confusion surrounding stakeholder pensions.

"For example, there is considerable concern that they will be a huge burden to employers but this does not have to be the case."

The survey among directors of small and medium-sized companies found one in three respondents had no understanding of the legislation surrounding the initiative.

A further one in five admitted their knowledge was limited, with the technology, food and drink and service industry sectors among those most poorly prepared.

Firms in the financial and professional services, education and construction industries proved to be the best informed.

The findings are a further blow to the Government scheme, which is intended to help the three million employees who earn between £10,000 and £20,000 a year and do not have a pension.

Employers with five or more staff must provide access to a scheme by October but staff do not have to sign up.

The Government is launching a major public awareness campaign to promote all types of pension provision.