Swindon-based Nationwide Building Society is in talks with the Post Office over the creation of a Universal Bank.

The revolutionary scheme is part of the Government's strategy to prevent thousands of post offices closing down because of changes to the way benefits and pensions are paid.

The Universal Bank means that pensioners and benefit recipients can continue to collect their money in cash at their post office after 2003, when all such money will be paid directly into bank accounts.

If these accounts were based at post offices through the Universal Bank, struggling outlets in rural areas and deprived urban estates would not face a dramatic loss of income.

But the scheme is being treated with caution by many high street banks, who claim it could cost them millions of pounds a year in lost revenue.

Nationwide building society supports the intention to provide bank accounts to people who are currently denied access to them, but says it has fulfiled this pledge with its Flex account.

While the building society has had talks with the Post Office, it has not agreed to the principal let alone the details of its business plan.

The Government wants progress by the New Year.