The Government's forthcoming stakeholder pensions have been thrown into disarray because insurers have failed to agree on a single portal for the electronic transfer of pension contributions.
With the stakeholder pensions due to come into force next April, pension providers are keen to use the Web to cut administration costs and avoid crippling overheads. Under government regulations pension companies can only charge customers a maximum of 1% of the stakeholder funds' total value.
Tight deadlines mean leading payroll suppliers may have to release a stakeholder package for employers early next year without an automatic link to a portal for the monthly transfer of pension deductions.
If employers get into the habit of sending the pension remittance details by post, the profit margins for insurers could disappear under a mountain of paper.
Dennis Keeling, chief executive of software suppliers' body Basda, said the Inland Revenue turned down its request in the summer to use the Government's online gateway as a portal for the start of the stakeholder regime.
Basda has stepped in to provide a temporary portal for channelling stakeholder remittance messages, based on its e-BIS-XML standard. A couple of insurers, including Abbey National, will pilot the scheme later this month alongside payroll suppliers including TAS Software and Sage.
This may be too late for some payroll suppliers to incorporate into their software causing headaches for IT departments.
Tony Thomas, technical director for TAS Software, said, "If employees are using three different pension providers you will have to set up three transfer procedures. This also has security implications."
A recent proposal from EMX portal - a subsidiary of the Association of Unit Trust and Investment Funds and thought to be worth about £300,000 - failed to win widespread support among pension providers.
But insurance IT chiefs remain optimistic. "The pilot will prove the benefits and insurers will join us once they see [them]," said Ian Nielson, operations manager for pension business support at Abbey National.