Manchester United are preparing to offer manager Sir Alex Ferguson a new contract at Old Trafford.

The fresh terms are believed to be worth £6.5m per year, with an added £1m bonus depending on the trophies that the Red Devils win.

The deal will remain on the same one-year rolling basis to which he first committed in 2004.

"All the talk at the top of the club over the last few months has been of a three-year plan," a United source told Goal.com. "The Glazers were not sure of Ferguson's plans so asked David Gill to tell him that his achievements over all these years would be recognised with a deal that would make him the best paid manager in British football.

"There have been a few rounds of talks and the club want it sorted before his annual holiday to the south of France at the end of the season.

"It makes good business sense for the club and the Glazers. Ferguson has always been loyal to them and they feel it is time he was rewarded for the job he has done."

Ferguson became United boss in 1986.