Post Office account limits plan to pay housing benefit direct

A Post Office account designed to receive welfare payments could restrict a government plan to have housing benefit paid directly to tenants because it cannot receive housing benefit payments.

Post Office Card Accounts were launched on 1 April 2003 with £1bn from the Department for Work and Pensions, as a result of the government's drive to pay benefit directly into tenants' bank accounts. Account holders are able to withdraw the money at post offices.

The government is testing paying housing benefit to private sector tenants in nine areas but the money cannot go into the Post Office accounts because it is paid by local authorities – unlike other benefits that are paid directly by the Department of Work and Pensions.

The account is causing problems for claimants who already choose to have their housing benefit paid directly to them rather than to their landlord, and benefit officers predict the problem will worsen as the number of tenants paid directly increases.

Pauline Humphries, chief income and benefits officer at Wandsworth council, said: "We have written to all Citizens Advice Bureaux advising them not to recommend that their clients open a Post Office Card Account because it's so limiting.

"So far we have had six people who want us to pay their money into a Post Office Card Account and they have been refused, so we will send a cheque and they will cash it at a bank. The problem will grow once the government starts paying more tenants directly."

We have told all Citizens Advice Bureaux not to recommend that clients open a Post Office Card Account

Pauline Humphries, Wandsworth council

A Post Office spokesman said: "The benefits that go into these accounts are the ones defined by the DWP. They set the parameters for it. We cannot change it. I am not aware of any plans to change the parameters."

He said he believed customers were advised that the account did not take housing benefit payments before they opened the account.

The Post Office accepts a wider range of identification than many banks, a feature that appeals to many people on benefits.

The account is being rolled out across the UK and 1.8 million people have opened one.

A spokesman for the Department for Work and Pensions said: "This is not the only account they can use: they can also use a bank account. But we recognise the issue around access."