Fears had been raised as many as eight out of 10 local branches could close if the network lost the contract to run the Post Office Card Account (POCA).

A number of firms, including PayPoint, wanted to run the business.

But Secretary of State for Work and Pensions James Purnell announced yesterday that the Post Office would continue to run the benefit and pension payment system.

Mark Bamforth, from Lytham's Warton Street post office, which was threatened with closure earlier this year, said the decision was "a weight off the shoulders".

"Postmasters can get on with their lives now," he said. "It's been a long time coming but they've finally made the right decision."

Peter Collins, who runs Grange Park post office and is North West president of the National Federation of Sub-Postmasters, said: "I'm delighted the Government have seen sense and left the POCA where people wanted it."

The Post Office will continue to run the POCA until 2015. An existing deal had been due to expire in 2010.

Making the announcement, Mr Purnell called the Post Office "a cherished national institution" and "a trusted brand".

Blackpool North and Fleetwood MP Joan Humble added: "This is a huge relief to postmasters and postmistresses and the users of the Post Office card account."

Blackpool South MP Gordon Marsden said the move created a platform for further potential opportunities for post offices.
He said: "It doesn't just throw a lifeline to the sub-post office service, but offers a new vision as to where the post office can go over the next five to 10 years."

And Michael Jack, MP for Fylde, said: "This is terrific for all those who campaigned on this issue and made their voices heard right at the heart of Government.
"It lifts a huge cloud from over the heads of subpostmasters who survived the last cull and were facing uncertainty over their futures.
"It's good that the Government have listened but I wish they had listened sooner because this caused a great deal of distress.