Manufacturers’ organisation EEF have urged the government to help small businesses by subsidising their pension contributions.

The government’s proposed system for personal accounts (set to be implemented by 2012) could put a strain on thousands of smaller firms, as they would need to contribute at least 3% to workers' retirement funds.

This scheme will require all employers to contribute a minimum of 3% to employee’s pension funds.

The EEF are recommending that the government offer financial assistance during the initial phase of the scheme: "This initial financial support is needed to assist the many smaller firms that will face the additional costs of administering and contributing to personal accounts on behalf of their employees".

The EEF are recommending a system which would subsidise a proportion of employers’ contributions for the first three years of the scheme.