Small businesses are being panicked into running unnecessary pension schemes, according to a Sussex finance expert.

Stakeholder pensions will be available to all employees in small firms from next April but the message on how they will be set up and run is getting confused.

Andrew Merricks, a partner with Simpsons, the Brighton-based financial advisers, said many businesses which had taken steps to implement schemes for staff did not understand the rules and had been sold products they did not need.

At a recent seminar in Brighton, he found almost 70 per cent of small employers were unclear about staff pensions and their own obligations.

He said: "As from April all companies employing five or more people will have to offer access to a pension scheme. There is no need for them to start a company pension scheme but there is an obligation to collect contributions through the payroll.

"Many pension firms have already set up approved stakeholder pensions and small businesses can offer these to their employees.

"There are three common misconceptions.

"Many business owners believe the new rules will mean they have to contribute to employees' pensions; they have got to start a company pension scheme and that any existing pension scheme will have to be ditched."

"They are wrong on all counts."

Mr Merricks said some unscrupulous companies were trying to persuade businesses to take out products they did not require.

"The rules are not exactly straightforward, but the whole issue may not be as bleak as many are painting it. Anyone in doubt should seek advice and even a second or third opinion."

Financial adviser Garry Spencer, of Wilbury Financial Management in Worthing, agreed there was a lack of knowledge on the part of employers but said he had not heard of any mis-selling.

He said: "After the last pensions mis-selling scandal, financial advisers are very careful about getting the right product for their customers."

Firms have until October 2001 to implement the new pensions.