A SHAKE-UP hailed as the "death of the pension book" after nearly 100 years was getting under way in post offices today.

For the first time, the elderly could have their state pension paid directly into a bank, building society or post office account, rather than over the counter.

But the Government will not start writing to pensioners in York and North Yorkshire to ask them to choose a new payment method for at least another month.

Pensioners will still be able to receive cash over the counter if they wish - even after the pension book is consigned to the dustbin in 2005.

Under the system going "live" today, there are three choices - an existing current account, a basic bank or building society account or the new Post Office Card Account (POCA).

People choosing a basic bank account or POCA will hand in their card at the local post office, telling the cashier how much they wish to withdraw.

The card will be swiped and the customer asked to type in a unique personal identification number (PIN) into a pad on the counter.

Cash can be withdrawn from basic bank accounts at hole-in-the-wall machines or at the post office, but direct debits and overdrafts are not allowed.

However, there have been claims that pensioners are being pushed into opening a normal bank account, instead of helping to support the local post office.

Steve Webb, the Liberal Democrats' pensions spokesman, said: "Many people receiving a letter believe they must supply bank details.

"The Government should stop harassing pensioners and, if they choose a post office card account, that choice should be respected."

But Graham Halliday, the Post Office's financial services director, said the new system would help ensure the future survival of sub-post offices.

Mr Halliday said: "This is a big change for people and it is a big change for us, but if we had done nothing it would have had a disastrous impact on post offices.

"We have introduced banking services to post offices and hope that people will keep on using us. With better services, sub-postmasters will have the opportunity to attract new customers."

Already 1.3 million people have been invited to change the way they receive benefits, with 500,000 providing existing bank details and 100,000 opting for a POCA.

The Government has admitted it will have to retain the pension book or giro system for people who cannot - or simply refuse - to adapt to the changes.

Updated: 10:51 Tuesday, April 01, 2003