High street banks sign up for £180m launch of Post Office 'Universal Bank'

By Michael Harrison Business Editor
Saturday 04 January 2014 05:11

A dozen high street banks yesterday signed contracts with the Post Office to provide a Universal Bank service through its network of branches but there are fears that this will not be enough to prevent a huge exodus of business from the loss-making organisation.

The banks, which include Barclays, HSBC, Lloyds TSB, Royal Bank of Scotland, Abbey National and the Co-operative, will pay £180m over the next five years to fund the Universal Bank, which will be available at 17,500 post office branches.

The aim behind the bank is to allow benefit claimants to continue receiving their payments through post offices when conventional order books and giro cheques begin to disappear from next April.

At present 13 million claimants get entitlements ranging from war pensions to child benefit through post offices while 10 million more have benefits paid direct into their bank accounts.

From next April, claimants will have three choices: to use their existing bank account, set up a Universal Bank account or apply for a Post Office card account.

A Department for Work and Pensions spokeswoman said it only expected the three million claimants who have no type of bank account at all to move to the Post Office card account. This will deprive the Post Office of millions of pounds in income.

At present it costs the DWP more than £500m a year to issue benefits through the current paper-based system – the bulk of which is transaction charges it pays to the Post Office.

The DWP denied that the intention was to run down the post office network, arguing that many claimants would continue to receive their entitlements through the Universal Bank service.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments