ISABEL COCKAYNE Village life faces ruin with thousands of post offices likely to close after the collapse of a £1bn pensions' payment contract.

ISABEL COCKAYNE

Village life faces ruin with thousands of post offices likely to close after the collapse of a £1bn pensions' payment contract, it emerged last night.

From 2010 the Department for Work and Pensions (DWP) will no longer pay for the Post Office card account which replaced pension books last year.

Last night sub-postmasters accused the government of ignoring remote villages, saying if the card account went, fewer pensioners would visit post offices leading to closures.

Colin Baker, general secretary for the National Federation of Sub-Postmasters, fears there will be closures and that would rip the "heart out of the community" with less people using other local businesses too, spelling rural decline.

But the DWP said the contract with the Royal Mail for the card account - worth £1bn from 2003 to 2010 - was only ever supposed to be an interim measure.

When the DWP scrapped pension books in favour of paying cash into bank accounts in February, customers wanted a simple mechanism to get their pensions and the card account was an answer to that.

Sources axing the card account would be a double whammy for post offices - lost business and a fall in the number of customers.

And as rural communities tend to have fewer customers, they are more vulnerable.

Mr Baker said: "The card account is the mainstay of post offices.

"If that footfall stops, post offices will be forced out of business and that very often means you take the heart of a village as well. It's the halo effect.

"Where there is a post office counter there is often other shops which keeps cash in the community."

He criticised the Government's mixed messages as it is also fulfilling a pledge to plough £150m a year into post offices until 2008.

Stuart Colborne, in-formation adviser for Age Concern Norfolk, had major concerns about the withdrawal of the card account, predicting a "bleak" future for pensioners.

He said: "The obvious knock-on effect if the card account was to stop, would be where do older people get their cash?

"If you are out in rural areas, and Norfolk is predominately rural, banks are few and far between. It is looking a bit bleak."

And South West Norfolk MP Christopher Fraser said the Government had not given the support needed.

He said: "Because of their importance to rural communities,

"I am concerned that the Government should do all it can to make Post Offices viable and secure in the long term.

"I would also urge local people to use our post offices, or face the possibility of losing them."

A spokeswoman for the DWP admitted ditching the card account would make a huge saving, saying it cost £1 to pay pensions into each card account, but only a penny to pay into a bank account.

She said: "This card account system was always an interim measure.

"The contract was from 2003-2010 and it was a good move away from Giros.

"We were concerned for those people who have never had a bank account and it was to get them used to chip and pin."

She said of the 4.2 million pensioners who had card accounts, 70pc already had bank accounts.

About 1.3m people would still be affected by the changes.

She stressed the DWP believed there would be no change in footfall at post offices because they provided access to banks.

Royal Mail said it was talking to the DWP.