Businesses are bracing themselves for more red tape misery because of the lack of take up of government-backed stakeholder pensions.

Experts at the Brighton office of accountancy group Hacker Young said the failure of the scheme may lead the Government to make pension contributions compulsory, a move that would be unpopular with the business community.

Miles Cary, senior partner with the group, said: "Stakeholder pensions have been a flop. If the Government makes pension schemes compulsory, then it will mean more red tape, more chaos and more headaches for business owners.

"Small and medium-sized businesses are already choked by red tape and the burden is unreasonable.

"Apart from the administrative blow, the financial strain could even topple some businesses.

"The Government should either come clean and say stakeholder pensions haven't worked or it must make it its priority to ensure any plans to enforce pension contributions are not detrimental to business."

At present, any firm employing five or more people must recommend each individual to join a pension scheme.

The number of people joining a pension scheme as a result of this has been minimal.

Mr Cary said: "Stakeholder pensions have not captured the imagination of the people they were targeted at. Instead of lower or middle-income earners, wealthy people have been using them as another investment vehicle.

"If the Government is keen to promote pension schemes, it should cease overloading businesses with ever- increasing amounts of unnecessary legislation.

"The Government's insistence on meddling in the affairs of small and medium-size firms will eventually drive a stake through the hearts of many businesses."