Post Office card accounts have been extended for one year, giving hundreds of thousands of users more time to make new arrangements to receive their state pensions. But vulnerable and elderly customers could still face challenges, warns Which?.
The Department for Work and Pensions (DWP) was originally due to close Post Office card accounts (POcas) by November 2021. It was recently announced that this deadline has been extended for pensioners until November 2022.
The extension only applies to payments from DWP – not HMRC – so those using a POca for other benefits will still need to provide HMRC with alternative bank details by 30 November 2021.
A Which? survey in August 2021 suggests this delay is vital, as six in 10 of our members who either hold an account themselves or have a family member who relies on one, said the closure will have a negative impact. Just over a quarter said they – or their family member – have already opened a new bank account.
Here we explain what is changing, who it will affect, and what you need to do before the scheme ends.
What is a Post Office card account (POca)?
A POca allows you to receive automated government payments such as benefits, tax credits or state pension, and collect these over the counter at your local Post Office.
It offers a simple banking service – with no overdraft facility, no transaction fees, and no standing orders or direct debits – for people who either can’t access a mainstream bank account, or don’t wish to. Account holders, or a nominated helper known as a ‘permanent agent’, can take out cash free of charge using a plastic card.
In February 2019, the DWP confirmed publicly that its POca contract would come to an end, though it has been encouraging users to switch to mainstream accounts since November 2015. The number of active POcas was just under 1.2m in October 2018. The DWP said there were 382,000 active accounts in July 2021.
A DWP spokesperson told Which? it is writing to all customers who currently receive payment into a POca, telling them the service is ending and encouraging those who are able to open a bank account to do so: ‘Those who remain unable to access such services will be migrated onto a new Payment Exception Service, which allows them to choose how they receive their payments.’
Fears for vulnerable and elderly customers
Michele Loughran of the Mental Health & Money Advice service told Which? she welcomes the extension and hopes further negotiations will allow POcas to remain in place, particularly for individuals who have mental health difficulties or who are vulnerable.
‘This extension will give us more time to advise, support and raise awareness around basic bank accounts,’ she said. ‘Banks are quite daunting for many people but especially for those who lack confidence and understanding. ID will also pose potential problems as will online access only.’
POcas have offered an accessible alternative to bank accounts since they were launched in April 2003.
Which? members told us this move ‘takes away confidence in what was an established and trusted routine’ and will lead to loss of independence for some people, who may not wish to switch to ‘impersonal’ big banks. Many are struggling to support loved ones through the process, particularly if they don’t hold Power of Attorney to help them with their finances.
One daughter said ‘no one will speak with her’ about her father’s account, even though he is 101 and doesn’t understand the situation. Another said his wife handles her father’s affairs because he has Alzheimer’s and is ‘having a nightmare transferring out the money to a new account’ because she does not have power of attorney.
Others told us they’ve struggled to open a bank account ‘because banks are reluctant to open accounts for people on benefits’ and ‘they do not have the ID documentation required to open one in the first place.’
We’ve compiled more comments from those affected by the closure below:
Another blow for local access to cash
With bank branches closing in their thousands since 2015, the axing of POcas by the DWP has delivered another blow to people who rely on local access to cash.
As one Which? member put it, this has ‘removed an easy-to-use facility and replaced it with an (existing) service from banks that have closed all local branches and is now not readily accessible for personal contact’.
Those in rural areas feel particularly aggrieved. A disabled POca user in Devon told us she often feels too unwell to drive the 58-mile round trip to her closest bank branch. The nearest cash machine is also 12 miles away, and the area has a poor broadband signal so online banking isn’t a viable option.
She said: ‘They can help me at my local Post Office. They know me, and they offer a service unlike an external faceless cash machine. We, in the rural areas are being discounted. How many city dwellers would accept no banks for many miles? None.’
- Find out more: head to our Freedom to Pay campaign page to find out why we’re calling on the government to protect access to cash
What do I need to do?
This depends on whether you use a POca to receive benefits or a state pension.
If you are in receipt of tax credits, Child Benefit or Guardians Allowance the original deadline still applies so you need to give HMRC alternative bank details before 30 November 2021.
You can contact HMRC’s helplines (0345 300 3900 for tax credits or 0300 200 3100 for Child Benefit) or use your Personal Tax Account to provide alternative account details.
If you are in receipt of the state pension, you will have to choose one of three options to receive payments before the POca scheme closes in November 2022:
- Use an existing account you have with a bank, building society or credit union
- Open a new account with a bank, building society or credit union
- Use the Payment Exceptions Service
The DWP has already sent letters to customers telling them that the POca is coming to an end and advising them of their options. If you have not responded, DWP will write to you again before November 2021.
Support should also be available at your local Post Office (or by calling them on 0345 722 33 44).
Opening a bank account
If you don’t already have a mainstream bank account, you will need to open a new one. This could be:
- a standard current account with the bank, building society or credit union of your choosing
- a packaged bank account, which offers a bundle of insurance products for a monthly fee
- a basic bank account, which has no overdraft facility and is designed for people who don’t qualify for a bank’s standard account due to poor credit history
The good news is that most UK banks, credit unions and building societies have an arrangement with the Post Office so that you can access everyday banking services. This means you can continue to go to your local Post Office to withdraw cash, deposit cash, cash cheques and make balance enquiries.
Once you’ve set up a new bank account, you can call the DWP helpline 0800 085 7133 (textphone 0800 085 7146) to provide your account details over the phone. Alternatively, you can complete the form included with the letter from the DWP and post it back for free using the envelope provided.
Find out more: how to open a bank account online
The Payment Exception Service
If you are unable to use a bank account – or don’t wish to – you can use the Payment Exceptions service.
You will be able to choose how you receive your payments. These methods include the delivery of digital vouchers via:
- a SMS
- an email
- a unique barcode displayed on a mobile phone
In addition, all customers who are migrated from POca to the new service will receive a reusable mag stripe plastic card, which can be used to receive their pension in cash from more than 28,000 PayPoint retail outlets or 11,500 Post Office branches.
The DWP says extensive work has been undertaken to identify those most at risk in order to provide vulnerable claimants with additional support before the move to the new system.
Find out more: the Payment Exception Service explained
Closing your POca
You will also need to ask the Post Office to close your account.
Make sure you don’t leave any money in there – you can withdraw all your money using your card or collect and complete an account closure form from your local Post Office.
Once your account is closed you will receive a closing statement. You’ll find more information on the Post Office website at postoffice.co.uk/post-office-card-account/important-changes.