The profitability of stakeholder pensions is at risk unless insurers invest in an electronic remittance standard, according to financial software specialists.
Suppliers and insurance companies have yet to agree the technical standards to be used to aid the electronic transfer of employee remittance information, even though government-backed stakeholder pensions are due to come into force next April.
Insurers and software suppliers are currently holding discussions to create a Web-based portal to channel employee remittance information via a standard based on XML, the Internet data language.
The modest development costs, estimated at about £300,000 - using the proposed EMX portal - have yet to be agreed by all the parties involved.
With customer charges limited to 1% of the stakeholder fund's total value, insurers are relying on Web-based stakeholder pensions to scrape a profit.
Financial software suppliers' association Basda has developed an electronic remittance advice message. But the association's chief executive, Dennis Keeling, warned that software suppliers need to start testing stakeholder packages now if they are to go on sale from next January.
"Pensions companies have to sort out how they will fund the EMX portal. But the software industry can't wait that long," he said. "If we don't start now stakeholder products will go out with paper remittance. The pensions industry doesn't want two million cheques through the post."
Basda would, however, consider setting up a stakeholder pension portal if the EMX option falls through, Keeling added.
The leading pension providers are due to meet next month to discuss the EMX project.