By James Landale
Chief political correspondent, BBC News 24
Existing life peers will not be thrown out of the House of Lords under plans to reform the second chamber.
Reform of the Lords was promised in the Queen's Speech
Some of the 92 remaining hereditary peers will also escape the axe if and when an elected system is introduced.
The move is designed to head off growing opposition to plans where many peers are fearful of their futures.
Instead of a mass expulsion, ministers want to use voluntary retirement and natural wastage through death to cut the number of peers over 15 years.
A senior Whitehall source said that compulsory expulsions were now only "a very small possibility" in the Government's plans to cut the current Lords from 741 members to just 450.
In the short term, it would mean that the Lords would balloon in size as it took in elected members without getting rid of any existing appointed peers.
They would be encouraged to retire by being offered a "redundancy package" including severance pay and pensions arrangements.
As for the remaining hereditary peers, ministers want some to stay on as appointed peers in the reformed lords to avoid a confrontation with the Tories.
They have significantly more hereditary peers than other parties and would suffer most if all were thrown out.
"You can't use a decision to remove the hereditaries gratuitously to strip the Tories of 42 people," the source said. "It's not the way to do constitutional change."
Ministers are also considering allowing peers to work part-time, drawing only a partial salary in the new part-elected, part-appointed house.
This would allow some appointed peers to continue doing their day jobs while attending the Lords in the evening.
Jack Straw, the leader of the Commons, is currently holding talks with other parties to see if some consensus is possible on Lords reform before publishing his plans in a white paper early next year.
There will then be debates and free votes in both houses on the issue.
Whitehall sources say the talks are making progress with all sides agreeing that the Lords should be part-elected, part-appointed and that any reforms should be brought in over a long period of time.
There is no agreement, however, over how many peers should be elected. Mr Straw wants half to be elected, but the Tories and the Lib Dems are pushing for 80 per cent to be elected.
The Lib Dem constitutional affairs spokesman Simon Hughes MP said: "Discussions on the future of the Lords are making good progress. There should be a politically representative and predominately elected second chamber, with no fewer powers than at present, to act as a compliment but not as a challenge to the House of Commons.
"Existing life peers should be free to retire but hereditary peers must go. Some hereditary peers, however, may be appointed for another term in order to ensure political balance during the transitional period."