England U21 boss Stuart Pearce is set to be offered improved terms by the FA on recommendation of Three Lions manager Fabio Capello.

The Daily Mail says Pearce, who also works with the senior side when his job with the youngsters permits, is out of contract in the summer after just over two years in the job, but will be asked to stay beyond his current deal.

Capello has been so impressed by Pearce's work with the junior team, who are preparing for the Under 21 European Championship in Sweden, that he wants him to commit long-term.

England's head coach had been waiting for Ian Watmore to start work at Soho Square as the FA's new chief executive. Now he is in place, talks will begin with Pearce.

Capello increasingly sees Pearce as a future England manager and the former Manchester City coach has responded well to the Italian's methods since his appointment in December 2007.

Pearce will be offered a new three-year deal worth around £1.5million to take him through to Euro 2012 in Poland and Ukraine, with the possibility he could succeed Capello if the head coach quits after that tournament.