More than 150,000 small employers may face fines of up to �50,000 each because they have no idea they must provide their employees with access to pension schemes by October.

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

Sean Tompkins, Prudential

And half of them say they will refuse to arrange a pension scheme even if they have to pay a fine.

Those findings come from a survey aimed at testing the level of awareness of the government's flagship plan to boost pension saving, stakeholder pensions.

In April, the new-style stakeholder pensions will go on sale for the first time.

All employers with more than five staff will be legally obliged to arrange a pension scheme for their employees within six months after that.

Facing fines

While no employer will be forced to contribute to the schemes, they must set them up so staff can pay in themselves.

5m staff currently have no access to an employer's pension scheme.

Any employer which fails to arrange a scheme by October 8 can be fined up to �50,000.

The survey of 500 employers, commissioned by the Prudential, found that 63% of them had no idea that stakeholder pensions would go on sale in April.

And 31% said they would not arrange a scheme, even if it meant a fine.

Sean Tompkins, marketing director of Prudential's financial services arm, 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."

In fact, more than 50 companies, mostly life insurers, are expected to offer stakeholder pensions.

How do they work?

The pension schemes are designed to be as simple as possible, allowing employers to give details on-line and sign up by post.

Deductions can be made from payroll, or, if that proves too burdensome, staff can arrange direct debits separately.

Most of the largest pension companies, such as Prudential, Legal & General, Standard Life and Scottish Widows have cut their charges so they can offer stakeholder pensions.

The aim of stakeholder pensions is to give access to pensions for five million staff who currently have no access to an employer's pension scheme.

Around 250,000 employers will have to set up pension schemes for the first time.

The new pensions will offer some of the lowest charges on the market.

That means more of the money paid into them will go towards the the individual's retirement fund, rather than the insurance company's profits.

The government has told pension providers they can only sell their pension schemes as "stakeholder pensions" if the total annual charges come to less than 1% of the amount invested.

Limits on costs

The difficulty for pension providers is that it will be hard to make a profit from that. They will incur big up-front costs in advertising, selling and administering the pension schemes on behalf of employers.

Because the charges cannot rise above 1% a year, many of those companies will have to wait years - perhaps more than 10 years - before they recover those costs and start to make a profit.

So they will have to keep their initial costs down and it is unlikely that sales people will be able to visit every small employer.

That means the initiative to set up a stakeholder pension must come from the employer.