Thousands of sub-post offices across the country could close if the Post Office loses its pensions and benefits contract, postmasters have warned.

Reports suggest that the Department for Work and Pensions has told Royal Mail that it has decided not to extend its £1bn contract for the Post Office account card when it runs out in 2010.

The account card is used by approximately four million people to claim their pensions and benefits.

However, the National Federation of Sub-Postmasters has warned that losing the contract would result in a decrease in sales of other goods in stores that also have post offices.

This, the federation argued, would close thousands of sub-post offices across the country.

Colin Baker, general secretary of the National Federation of Sub-Postmasters, said: I believe this will close thousands of post offices and restrict people’s choice - a choice they fought to preserve. The government has to make up its mind about what it wants from the Post Office. I will be taking this up at the very highest level.”